Inward Processing: Everything you need to know

Processing Plant

Emma Long, Avocet Clearance

Minimising Import Taxes

Minimising customs liability is a fundamental goal for businesses involved in international trade. One way this can be achieved is through the use of Customs Special Procedures, which relate to various aspects of trade, from the transit of goods to their storage, specific use, and processing.

In this article we will focus on the benefits and requirements of Inward Processing, otherwise known as Inward Processing Relief (IPR).

Inward Processing grants relief of import taxes, such as VAT, customs import duty, excise duty when imported goods undergo processing operations in the UK, before they are re-exported again. 

What is Processing?

Processing operations include repair, destruction, repacking, sorting, and complex manufacture. If numerous goods are produced by any of the above listed processing operations, then businesses are required to distinguish between the main and secondary products. For instance, the necessary by-products produced as a consequence of producing a main product are typically considered secondary products.

Inward Processing Authorisation

The authorisation required to utilise Inward Processing procedures, along with the period within which the IP procedure is to be discharged, is provided by the relevant customs authorities. In the UK, this is HMRC.

The conditions under which the goods may be processed and moved is explained in the letter of authorisation. As the recipient of this letter, the relevant business becomes an authorisation holder, and is therefore responsible for ensuring that the conditions of the letter are met, along with the associated charged and customs duty applicable to the goods entered into the authorisation. 

Businesses can apply for either full authorisation or authorisation by declaration.

  • Full Authorisation

Businesses who regularly use IP procedures should apply for full authorisation at least one month before importing.

  • Authorisation by Declaration

Non-regular users of IP procedures, such as businesses who import goods only occasionally to IP and who process their goods in the UK, not more than 3 times a year, should consider authorisation by declaration. It should be noted that goods worth £500,000 or more listed under chapters 93 and 97, relating to arms and ammunition and artworks, collectables, and antiques respectively, are not suitable for authorisation by declaration. Applications are made via submission of the customs declaration.

  • Retrospective Authorisation

It is possible for businesses to retrospectively apply for authorisation up to one year after the goods were originally received or imported. This would allow any import taxes paid to be reclaimed.

Customs Guarantee

Authorisation for Inward Processing procedures can only be issued once a guarantee is in place. In order to become an authorisation holder, businesses must therefore set up either an (1) individual guarantee or (2) a customs comprehensive guarantee.

  • Individual Guarantee

An individual guarantee only covers the potential customs debt of an individual Single Administrative Document (SAD) or C88 customs entry and is used for Authorisation by Declaration.

  • Customs Comprehensive Guarantee (CCG)

A CCG covers the potential customs debt of all goods held under full IP authorisation. From January 2021 it will be possible for most companies to apply for a CCG waiver with HMRC, where a CCG will no longer be required, making the application process much faster.

Throughput Period

The throughput period is the time required to process the goods from the date of their importation or receipt to the date of their exportation or disposal. The standard throughput period for goods whereby an authorisation by declaration is in place is 6 months, although longer periods can be requested from HMRC.

What does an IP Operation Involve?

  • Rate(s) of yield

The rate of yield is a measure of how many IP imports are required in order to produce the final, or processed, goods. If multiple processing operations are included in the IP application, then individual rates of yield are required for each operation.

  • Economic Test

The economic test only applies to specific goods. Where a test is required, evidence must be provided as to why EU-produced goods cannot be used in the place of non-EU goods.

  • Record Keeping

Records must be kept for all goods entered into IP for a period of at least 4 years after their export or disposal.


The equivalence procedure enables the use of identical free circulation goods in place of IP goods for the purposes of re-export and processing. Equivalence therefore allows businesses to hold both free circulation and IP goods in common stock without the need to distinguish which particular goods have been entered into IP.

Movement of IP Goods

So long as the required approval is in order, goods entered into IP can be moved between different IP authorisation holders. It is, however, essential that the location of the goods is kept on record at all times.

Customs Liability

If an IP authorisation holder transfers their rights and obligations (TORO), then they are still liable. The discharge of liability is only complete when all conditions for the use of the IP procedure have been met, and when the goods, processed and unprocessed alike, have undergone a type of discharge, such as being exported to a non-EU territory, or being released for free circulation within the EU.

Bill of Discharge

The bill of discharge is the periodic IP return that accounts for all goods imported to and discharged from the IP procedure. This must be lodged with HMRC within the time period specified.

How can we help?

Our specialist consultants can offer practical advice and assistance with all aspects of Inward Processing, including application and management. For more information, please send us a message at and one of our advisers will be in touch.

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