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Fulfilment House Due Diligence Scheme – 1st April 2018

The new Fulfilment House Due Diligence Scheme will open for online applications on 1 April 2018. From that date, businesses in the UK that store any goods imported from outside the European Union (EU) owned by, or on behalf of, someone established outside the EU, will need to apply for HMRC approval if those goods are offered for sale. The deadline for applications from existing businesses falling within the scope of the scheme is 30 June 2018, and there are penalties for late applications. For businesses that commence trading on or after 1 April 2018, the application deadline date is 30 September 2018.

Businesses that only store or fulfil goods that they own, or only store or fulfil goods that are not imported from outside the EU, are not required to register.

Registered businesses must carry out certain checks and keep certain records from 1 April 2019. Businesses covered by the scheme will not be allowed to trade as a Fulfilment Business from this date if they do not have approval from HMRC. Those that do, risk a £10,000 penalty and a criminal conviction.

Duties

From 1 April 2019, registered businesses will be required to keep a record of:

– overseas customers’ names and contact details;
– overseas customers’ VAT registration numbers;
– the type and quantities of goods stored in the warehouse;
– import entry numbers;
– the delivery addresses; and
– notices that the business will need to give its overseas customers, which explain their tax and duty obligations in the UK.

Records must be kept for six years – a penalty of £500 may be imposed for failure to comply with this requirement.

Early preparation in this area is recommended to ensure that the application for approval is made on time, and that systems are in place to gather and maintain the necessary records.

Further information can be found on the GOV.UK webpage: Fulfilment House Due Diligence Scheme.

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Tackling the Plastic Problem

As widely speculated, the Chancellor announced a call for evidence to explore how changes to the tax system or charges could be used to reduce the amount of single-use plastics, by reducing unnecessary production, increasing reuse, and improving recycling.

In the consultation document entitled Tackling the plastic problem: using the tax system or charges to address single-use plastic waste , the government says it will also explore how it can drive innovation in this area to achieve the same outcomes, with funding available for businesses and universities to carry out work in this area.

The aim is to look at how the same economic incentives can drive innovation, for example by stimulating businesses to develop and integrate new technology, or by encouraging growth in the recycling industry by addressing barriers to investment.

The consultation will look broadly across the whole supply chain, from production and retail to consumption and disposal, in order to gain the best possible understanding of the whole landscape before the government decides on a course of action.


Offshore income and the Requirement To Correct (RTC) rule

HMRC are getting noticeably tougher on those who try to evade tax by hiding their assets or income offshore. They are increasing the size and range of penalties charged, and increasing the number of prosecutions of serious evaders.

Broadly, a UK-resident taxpayer has a responsibility to notify HMRC of any taxable offshore income they receive. Income is considered ‘offshore income’ if it comes from a territory outside the United Kingdom. It includes:

– interest from overseas bank or building society accounts;
– dividends and interest from overseas companies;
– rent from overseas properties;
– wages, benefits or royalties earned outside the UK.

New legislation, known as the Requirement to Correct (RTC), will dramatically increase the penalties for people who have not declared tax or declared the wrong amount of tax on their offshore income and gains.

The purpose of the RTC legislation is to require those with undeclared offshore tax liabilities (relating to income tax, capital gains tax or inheritance tax for the relevant periods) to disclose those to HMRC on or before 30 September 2018. This will allow HMRC to take the appropriate action, for example, the collection of tax, interest and any penalties due under the appropriate legislation currently in force.

30 September 2018 was chosen as the final date for corrections as this is the date by which more than 100 countries will exchange data on financial accounts under the Common Reporting Standard (CRS).

CRS data will significantly enhance HMRC’s ability to detect offshore non-compliance and it is in taxpayers’ interests to correct any non-compliance before that data is received.

To ensure there is an incentive for taxpayers to correct any offshore tax non-compliance on or before 30 September 2018, there are increased penalties for any failures to correct (FTC) by that date. The new FTC penalty is likely to be much higher than the existing penalties, with a minimum penalty of 100% of the tax involved.

If taxpayers are unsure whether they have undeclared UK tax liabilities that involve offshore matters or transfers, they should check their affairs and if necessary put things right before they become liable to the new FTC penalties that will come into force on 1 October 2018.