FHDDS51400 | Penalties, sanctions and offences: penalties – policy: Trading without approval - overview

(The Fulfilment Businesses Regulations 2018, regulation 4 & Finance Act (No.2) 2017, section 48)

The FHDDS is designed to ensure that operators of fulfilment businesses are fit and proper, take reasonable steps to ensure that their customers are compliant with their tax and customs obligations, and maintain records of the goods they handle, sufficient to allow HMRC to carry out meaningful compliance checks.

From 1st April 2019, any operator of an imported goods fulfilment business that has not been approved under the scheme but continues to trade will be considered to be trading without approval and will be liable for a civil penalty or criminal prosecution where appropriate. Also, any goods being stored by such a business whilst it is not an approved person are liable to forfeiture - See FHDDS52160.

Any business that intends to start trading as a fulfilment business after 1st April 2019 must apply to HMRC for approval and receive notification of that approval prior to commencing to trade. FHDDS legislation does not contain any provision for belated notification, so if a person commences trading after 1st April 2019 without an approval they will be trading without approval and could be liable to prosecution or a civil penalty.

Once you have clear evidence of the carrying on of an imported goods fulfilment business after 1st April 2019 by a person who is not approved under FHDDS, and have confirmed that the case will not be adopted by FIS for criminal investigation, you will need to consider all of the available evidence to determine whether the contravention was:

· deliberate and concealed;

· deliberate but not concealed, or

· not deliberate.

The baseline penalty amounts specified at para 2 of Schedule 13 to the Finance (No 2) Act 2017 are:

· for contraventions that were deliberate and concealed - £10,000 (the ‘maximum amount’)

· for contraventions that were deliberate but not concealed - £7,000

· in any other case - £3,000

In addition, you will need to consider the following issues prior to making a decision to charge a penalty:

• Whether the person has a reasonable excuse for the contravention FHDDS51505.

• Whether the penalty should be reduced because the person has disclosed the contravention to HMRC, or for other reasons (‘special reduction’) FHDDS51510, FHDDS51805, FHDDS51830 and CH71500.

• Whether a company officer should be made liable to pay all or part of a penalty FHDDS51730.

In relation to any FHDDS penalty assessment the person is entitled to a review of, and can appeal against, our decision

· that a penalty is payable, and/or

· the amount of the penalty.

Suspension of penalties is not applicable to FHDDS behavioural penalties.