FHDDS – obligations for fulfilment houses storing overseas sellers' goods in the UK

The Fulfilment House Due Diligence Scheme, abbreviated to FHDDS, is a mandatory registration and reporting programme in the UK that covers all businesses storing goods belonging to sellers not established in the United Kingdom and helping those sellers fulfil orders to UK customers. The scheme was introduced in 2018 as HMRC's response to a sharp rise in VAT fraud committed by overseas e-commerce sellers — particularly from Asia — who had for years been avoiding UK VAT obligations. For Polish businesses operating warehouses or fulfilment centres in the United Kingdom, FHDDS means concrete obligations: registration with HMRC, seller due diligence checks, record-keeping and regular reporting. Failure to register carries a risk of penalties of up to £10,000 per day. This article explains everything you need to know about FHDDS — from the definition through to registration procedures and day-to-day obligations.

What is FHDDS and why was it introduced

FHDDS (Fulfilment House Due Diligence Scheme) is a programme introduced by HMRC under the Finance Act 2018. Its purpose is to eliminate VAT fraud by overseas online sellers.

Before FHDDS was introduced, the situation was as follows: sellers from China, Hong Kong or South Korea would send goods to fulfilment warehouses in the UK (for example Amazon FBA), sell them to UK customers through online marketplaces, but would not register for UK VAT and would not remit the tax due. Fulfilment warehouses were an intermediary in the chain that — even when aware of the problem — had no legal obligation to act.

FHDDS changed that: UK fulfilment houses are now responsible for verifying their clients' VAT compliance.

Who must register for FHDDS

Registration is compulsory for all individuals and businesses carrying out fulfilment activities in the UK that meet both of the following conditions:

1. They store goods belonging to sellers not established in the UK (non-UK established sellers)
2. They assist those sellers in delivering goods to customers in the UK

The "non-UK" criterion means: a company or individual that does not have a fixed establishment in the United Kingdom.

Type of activity	FHDDS required?
UK warehouse serving sellers from PL, CN, DE, US	YES
Amazon FBA Fulfilment Centre UK	YES (Amazon is registered)
Own B2B warehouse (own goods only)	NO
Warehouse serving only UK-established sellers	NO
Drop-shipping (goods sent direct from supplier)	Depends — if you do not physically store the goods, NO

Who is exempt from FHDDS

Fulfilment operators are exempt if they: - serve only UK-established sellers - served only EU sellers (up to 31 December 2020 — EU sellers are now classified as "overseas" and the exemption no longer applies) - operate solely as storage for their own goods (they do not provide fulfilment services to third parties)

Important change following Brexit: before 2021, sellers from the EU (including Poland) were treated as "EU-established" and UK warehouses were not required to apply FHDDS to their goods. From 1 January 2021, EU sellers became "overseas sellers" from HMRC's perspective. This means that UK warehouses storing goods belonging to Polish companies are now subject to FHDDS in respect of those goods.

How to register for FHDDS — step-by-step procedure

Registration is completed through HMRC's online portal:

Step 1: Go to GOV.UK → FHDDS registration service

Step 2: Provide company details: - Full name and registered address - Company registration number (if a UK company) - VAT/EORI number (if an overseas company) - Contact details of the person responsible for compliance

Step 3: Describe the scope of your activities: - Number of sellers for whom you provide services - Types of goods (categories) - Estimated annual turnover from fulfilment activities

Step 4: Submit a declaration confirming your understanding of FHDDS obligations

Step 5: You will receive an FHDDS registration number — keep it safe, as you will need to provide it to your sellers

Registration deadline: you must register before you begin providing fulfilment services for overseas sellers. If you are already operating — registration should take place without delay.

Obligations after registration — what you must do on an ongoing basis

Registration is only the beginning. Once entered in the FHDDS register, you have the following obligations:

1. Due diligence on each seller (fulfilment client)

Before accepting goods from a new seller, you must verify: - Whether the seller is registered for UK VAT (if their turnover exceeds the £90,000 threshold)? - Whether they hold an active UK VAT number or have applied for one? - What goods they sell (HS/commodity code classification)? - Where they are established (country of establishment)?

Documents you should collect: - Copy of the UK VAT registration certificate (or confirmation that an application has been submitted) - Copy of the passport or identity document of the owner/director - Extract from the company register (Companies House or overseas equivalent)

2. Ongoing monitoring of the seller's VAT compliance

Verifying at onboarding is not enough. FHDDS requires ongoing monitoring: - Check at least every 12 months that the seller still holds an active UK VAT number - If a seller has exceeded the VAT threshold and has not registered — you must notify them in writing to register - If the seller still fails to act — you must suspend or terminate services to them

3. Record retention — 6 years

All documents relating to due diligence must be retained for a minimum of 6 years: - Onboarding checklist per seller - Copies of identity documents - Correspondence regarding VAT compliance - Records of goods stored in the warehouse

4. Reporting to HMRC

HMRC may request a report on your FHDDS activities at any time. You should be ready to provide: - A list of active sellers and their UK VAT numbers - A list of sellers whose services you have suspended due to non-compliance - A record of due diligence checks carried out

5. Notifying HMRC of irregularities

If you discover that a seller is deliberately evading VAT or has provided false information — you are required to notify HMRC.

Penalties for failure to register and FHDDS breaches

Penalties are severe and may be applied on a daily basis:

Breach	Penalty
Failure to register (where the obligation exists)	Up to £10,000 per day
Failure to carry out due diligence	Up to £3,000 per breach
Failure to maintain records / refusal to make them available to HMRC	Up to £3,000 per breach
Continuing to provide services to a non-compliant seller	Up to £10,000 per seller
Providing false information to HMRC	Criminal penalty

HMRC has the right to carry out unannounced inspections.

What FHDDS means for Polish businesses with a UK warehouse

If your Polish company: - operates a warehouse or fulfilment centre in the UK - serves Polish or other European e-commerce sellers

— then following Brexit you are subject to FHDDS. You must register and implement due diligence procedures.

Typical scenarios for Polish businesses:

Scenario A: A Polish company stores goods belonging to other Polish exporters in the UK → FHDDS required. Polish exporters are now "overseas sellers" from a UK perspective.

Scenario B: A Polish company operates its own warehouse for its own goods sold in the UK → FHDDS does not apply — you are not providing fulfilment services to third parties.

Scenario C: A Polish company uses a UK fulfilment house (e.g. Amazon FBA) for its own goods → You are the seller (overseas seller). You must register for UK VAT (if you exceed the threshold) and provide VAT documents to the fulfilment house.

FHDDS and Amazon FBA in the UK

Amazon UK is registered as a Fulfilment House under FHDDS. This means Amazon: - verifies the UK VAT numbers of all sellers using FBA UK - may suspend the account of a seller who does not hold an active UK VAT number - reports seller data and their turnover to HMRC

If you sell through Amazon FBA UK without UK VAT registration — you risk account suspension and a tax assessment from HMRC.