- Inward Processing Relief (IPR) suspends customs duty + import VAT on goods you import to process, repair or assemble, on the basis they are re-exported.
- Re-export the processed goods and no UK duty or import VAT is paid; release them to UK free circulation instead and the suspended charges fall due.
- Covers manufacturing, assembly, customisation, and repairs.
- Needs HMRC authorisation and records of throughput and disposal, usually within a set processing period.
- Suits importers who add value and re-export, repair goods cross-border, or import components for partly-overseas sales. Not the same as customs warehousing (storage, no processing).
What is Inward Processing Relief?
Inward Processing (IP, often called Inward Processing Relief or IPR) is a customs special procedure that lets you import goods from outside the UK to be processed, repaired or incorporated into other goods, with customs duty and import VAT suspended at import.
The principle: the UK does not want to tax goods that are only passing through to be worked on and sent back out. So if the processed products are re-exported, the duty and import VAT are never paid. If you decide to keep them in the UK market instead, the suspended charges become due.
How inward processing works
- Import under IP. The CDS declaration enters the goods to inward processing rather than free circulation, so no duty or import VAT is paid on arrival.
- Process the goods. Manufacture, assemble, customise, or repair them within the authorised processing period.
- Dispose of the products. Two main routes:
- Re-export the processed goods: no UK duty or import VAT is paid.
- Release to UK free circulation: the suspended duty and import VAT become due (calculated under the rules that apply to the import).
- Account for everything. You report what you imported, processed and disposed of, so HMRC can see the goods were used as intended.
What counts as processing
Processing is interpreted broadly. It includes:
- Manufacturing and assembly, incorporating imported components into a finished product.
- Customisation or adaptation of imported goods.
- Repair, including warranty repairs of goods sent in from overseas.
- Processing that changes the goods' nature or condition.
For ecommerce, the common cases are importing components to build or customise products that are then sold (partly overseas), and handling cross-border repairs and returns without paying duty twice.
Authorisation and record-keeping
Inward processing requires authorisation from HMRC. There are two broad routes:
- Full authorisation: applied for in advance, for businesses using IP regularly. You agree the goods, processes, and a throughput period with HMRC.
- Authorisation by declaration: for occasional or one-off use, applied for on the import declaration itself (subject to conditions and limits).
You must keep records tracking the imported goods, the processing, and the disposal (re-export or release), and account for them within the set period. Getting the record-keeping right is the main ongoing obligation, so IP suits businesses willing to run that discipline. HMRC sets out the detail in its inward processing guidance.
Who inward processing suits
- Importers who add value and re-export: import components or raw goods, make/customise a product, and ship a meaningful share overseas.
- Cross-border repairs: bring goods in to repair under warranty and send them back without paying UK duty.
- Higher-duty inputs, where suspending duty on re-exported volume is most material.
It is overkill for a seller who simply imports finished stock and sells it all in the UK, there is no re-export, so there is nothing to relieve (use customs warehousing for cash-flow deferral instead, or just PVA for the VAT). If your model involves processing and re-export, IP can be a major saving. GoEcom can match you with a customs-aware accountant to assess it.