4 Key Questions on Inward Processing

28 February 2022

We're working with many businesses who are finding Inward Processing Relief increasingly challenging.

Here are some of the most common queries we receive:

  1. I import goods for repair but have to pay duty and VAT.  Is there any way this can be avoided?
  2. We manufacture goods in the UK that are predominantly exported.  Are there any reliefs for import duties on our raw materials?
  3. We import goods that are processed and delivered to another UK company who then export.  What can be done to waive customs duties on import?
  4. I’ve heard this term IPR – what is it?

If you have thought about any of the above, you will need our assistance to comply with the complex Inward Processing regulations.  Our Indirect Tax Team are available to assist UK businesses to navigate the processes and produce the documents required.

Read on below for how Inward Processing can impact businesses:

Now, more than ever, Inward Processing has to be a consideration for any business involved in the manufacture of goods which are exported from the UK.  With the UK’s departure from the EU, consignments to/from the EU are now subject to customs formalities. This in turn creates the potential for customs duties in the supply chain that were not in existence in 2020.

For manufacturers, inward processing allows for raw materials and components to be imported for processing without the requirement to pay the import duties.  The export of the processed goods discharges the import duties fully, but IP also benefits manufacturers as the duties will only be liable on those products that are sold in the UK.

Additional benefits when trading with the EU include the potential to ship under the zero-tariff arrangements.  If the processed goods meet the rules of origin set out in the UK/EU Trade Cooperation Agreement, then they can be imported into the EU without payment of the customs duty.  For some UK businesses, this could alleviate the additional costs of Brexit so it is worthwhile understanding how IP impacts the supply chain.

Inward processing is also now an important consideration for any UK business who receives goods that require repair, servicing or calibration.  The use of IP relieves the business of any customs duty, but it also ensures that import VAT does not become an issue. 

HMRC changed its policy on import VAT in 2019 so any UK business importing goods that they do not own will not be entitled to reclaim the import VAT incurred via the import declaration.  This is still the case under PVA, so IP is the only way to avoid this hidden cost.

Our Customs Team is available to discuss your business’ activities and provide advice and assistance on inward processing. We can guide you through the complex application process to ensure that the knowledge and procedures are in place to comply with the additional obligations that IP places on the business.

Got a question? Get in touch for key advice

If you would like our team to contact you to discuss the requirements for inward processing, please get in touch

Look out for more articles in this series of topics on international trade from our specialist Indirect Tax Team.

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