FHDDS32350 - Approval, revoking the approval and variations: approval – pre-approval visit: areas to examine during the visit

During the pre-approval visit there are specific areas the assurance officer should consider as well as completing an in-depth look at the proposed business. It is important that all answers given by the trader are not taken at face value.

In particular, the officer should focus on the following:

  • confirm the legal entity of the business (sole proprietor, partnership or a limited company); if a limited company, the officer should view the trader’s certificate of incorporation and obtain details of all directors; these details should be closely examined, verified and risk tested;
  • what other business interests (associated companies) the Directors, or others involved in the business have;
  • who is financing the company (financial backing) and where the money came from;
  • consider whether the records the company plans to maintain, and the checks they plan to make, are in accordance with FHDDS legislation. This should include the import entry number (including date) and maintaining a list of list of the owners of the goods
  • examine the business plan, cash flow, and profitability of the business (do the numbers add up and provide for the apparent lifestyles of the owners / directors etc.); Does the business meet the throughout levels or is the trade facility genuine?
  • establish the trader’s bank accounts, any loans/overdraft facilities they may have, and what security has been taken by the bank;
  • identify who the applicant’s customers and suppliers are (if applicable) and who owns the goods they store, establish if discounts will be offered or received on sales or purchases (registered owners);
  • establish if title for the goods changes when imported – amended to FHDDS is this info FH would know?
  • establish how the trader identified and secured potential suppliers and customers, owners of the goods, and how they were vetted;
  • establish the type of goods it is anticipated will be held in the warehouse. This to include the location of any high value stock and security arrangements.
  • is the applicant involved with any ‘cash’ transactions? (officers are reminded of the risk of money laundering, see Money laundering supervision for high value dealers).
  • what short/medium term commercial commitments can the trader demonstrate;
  • what assets does the business have (this should include both fixed and moveable assets); for example, do they own the property or is this leased (if it is leased, consider the length of the lease and any costs the business would incur if the lease was prematurely terminated); do they own or operate any vehicles;

The aim of these enquiries are to build a picture of risk for the applicant. However, it is important to note that they should not in themselves be used as a reason to reject an application under the scheme – the only basis for rejecting an application is if the business fails to meet the fit and proper standards.

It should be noted that during the initial 12 months after registration opened (1/4/2018 to 31/3/2019) the applicant was not expected to already have the required FHDDS processes or record-keeping in place. The aim of the pre-approval visit was to test how familiar they were with the requirements and to educate them to ensure they were ready for 1st April 2019 when the scheme went live.

Officers should document all questions asked together with the answers in accordance with HMRC requirements for notebook completion.