• Tradephlo - Inward Processing
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Introduction to Inward Processing

When non-EU items are imported, processed, and then exported outside the EU, they are exempt from import VAT and customs duties under inward processing (formerly known as inward processing relief). An HMRC authorization known as “Inwards Processing Exemption” enables relief from customs duty and import VAT on imported goods that are processed before being re-exported.

The system of Inward Processing has been designed to give businesses the opportunity to process goods imported from outside the EU, even before finalising on whether to sell the finished products within or outside the EU. IP also applies to goods that need common handling procedures to maintain, upgrade, or get them ready for distribution. 

After processing, the goods can either be exported again, released into free circulation within the EU, kept in a free zone or under customs warehousing. The goods can be exported back to the UK without the businesses having to pay VAT or customs duties on the imported goods. There are two different approaches; one allows the duty to be suspended, while the other calls for a smaller or later payment. 

Who can use inward processing?

  • Individuals, partnerships or corporate bodies established within the European Union, acting on their own behalf or representing a non-Union body.

  • Individuals, partnerships or corporate bodies established outside the European Union provided imports are of a non-commercial nature.

When imported under IP, these goods are not subject to:

  • Import duty

  • The taxes like VAT/Excise related to import

  • Measures for commercial policies

By utilising Inwards Processing Relief, organisations that engage in international trade may drastically lower their cost of sales and raise profits as a result. However, it is necessary to take into account ongoing administrative costs and compliance responsibilities.

Before you apply

You’ll need to gather this information together before you apply:

  • The commodity code for your respective goods(this will be at least 8 digits)

  • Valuation of goods if you release them to free circulation

  • The Quantity of goods you’re going to process

  • The process to be carried out

  • Time duration to process the goods

  • The rate of yield

  • Details of where and what data will be stored regarding the process

  • where you’ll enter the goods to inward processing

  • where you intend to discharge them from inward processing

  • names and addresses of anyone else that will be processing or repairing goods, for example sub-contractors

How to apply

There are 4 types of authorisation you can get to use inward processing:

  • full

  • retrospective

  • by declaration

  • authorisations covering Northern Ireland and the EU

Except when you seek for authorization in your declaration, you should apply for authorization at least a month before you intend to import your items. This will allow HMRC the time to review your application; if more time is required, HMRC shall let you know through a formal communication.

After you’ve applied

You’ll receive a letter from HMRC that sets out the authorisation conditions.

Conditions include things like:

  • paying Customs Duty and other charges

  • keeping detailed records

Sign up with tradePhlo today to complete your declarations via CDS-ready custom declaration software like tradePhlo which lets you complete a customs declaration  in just 10 – 15 minutes starting at £7 per declaration. To learn more about the process of submitting a declaration through TradePhlo, click here

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