1. Introduction to Inward Processing
Inward Processing (IP) is a UK customs procedure administered by HM Revenue & Customs (HMRC). It allows eligible goods imported into the UK for processing, manufacturing or repair to benefit from suspension of Customs Duty and import VAT, subject to the relevant conditions.
2. Types of Authorisation
Businesses must obtain the appropriate authorisation for inward processing, maintain accurate records and discharge the procedure within the authorised period.
Full authorisation is generally suitable for businesses regularly using inward processing. Applications should normally be submitted at least one month before the intended import date. Authorisation specifies the goods, processing operations, rate of yield and period for discharge.
Retrospective authorisation is usually available for up to 12 months before the application, subject to HMRC’s conditions and restrictions.
Authorisation by Declaration (AbD) allows eligible businesses to request authorisation through their import customs declaration without a separate advance application. HMRC restricts AbD to qualifying transactions, including a maximum of 10 uses in a rolling 12-month period, a consignment value not exceeding £500,000, and processing carried out entirely in the UK. Restrictions apply to certain goods and customs procedures.
However, a customs security (a financial guarantee) must generally cover the suspended Customs Duty and import VAT.
3. Key Time Limits
| Requirement | Time limit |
|---|---|
| Full authorisation application | Normally at least 1 month before import |
| AbD discharge period | Normally 6 months |
| Full authorisation discharge period | Generally no more than 12 months, subject to exceptions |
| Bill of Discharge submission | Within 30 days after the discharge period ends |
| Record retention | 4 years |
For full authorisation, the discharge period may be calculated using monthly or approved quarterly aggregation arrangements. Businesses should check the specific conditions of their authorisation and calculate deadlines accordingly.
4. Bills of Discharge and Record-Keeping
A Bill of Discharge (BoD) accounts for goods entered into inward processing and demonstrates how the procedure has been discharged. BoD1 is used by full authorisation holders, while BoD3 applies to authorisation by declaration.
Records should link import declarations to processing activities, yield calculations, waste or losses, and export or other permitted disposal evidence because failure to discharge the procedure or submit the required documentation on time may result in customs debt, penalties or other compliance action.
5. Discharging Inward Processing
The procedure may be discharged by re-exporting the goods or processed products, releasing them into UK free circulation, transferring them to another permitted customs procedure, or using another approved method of disposal.
Where goods are released into free circulation, the relevant Customs Duty and import VAT may become payable. Businesses must ensure that the appropriate declaration is accepted and that all authorisation conditions are satisfied.
6. Conclusion
Inward processing can reduce import costs and improve cash flow for UK businesses involved in manufacturing, repair and export activities. However, the relief depends on compliance with authorisation conditions, security requirements, record-keeping obligations and discharge deadlines. Businesses should select the appropriate authorisation route and monitor each consignment carefully.
Official HMRC guidance: Special procedure: inward processing.
This article summarises HMRC guidance. Businesses should verify current requirements and transaction-specific conditions on GOV.UK before importing goods.
