Inward Processing Relief (IPR) is a customs regime which allows companies to import goods from outside the Union for processing. The “finished” goods must be disposed of in an approved manner, e.g. by re-export outside the Union or by deposit in a customs warehouse.

IPR allows both customs duty and import VAT relief for the goods (raw materials or semi-manufactured goods) imported for processing into manufactured products for re-exportation to non-EU destinations. IPR is also possible for goods being sent to the UK for repair or replacement, whether or not under warranty or as part of a service contract. Customs duty due at import is suspended contingent on the disposal (usually by re-export) of the finished products. In some circumstances the processed goods may not be the imported goods but “equivalent” goods. Indeed it is possible, if authorised by HMRC, to export the equivalent finished goods before the manufacturing materials are imported under IPR.

The Union Customs Code (Parliament and Council Regulation 952/2013) effected major changes to the Union’s IPR scheme, including merger with the Processing Under Customs Control (PCC) regime, abolition of duty drawback and compensatory interest, a new requirement for customs guarantee in respect of the duty suspended under IPR, and enhanced benefits including reduced guarantees for Authorised Economic Operators.

Operating IPR usually requires prior authorisation from HMRC. The application process can be lengthy and complicated. If authorised, the operator must implement additional compliance processes. Before applying, for IPR companies should consider whether the benefit justifies the time and cost of applying for and administering this regime.

At present, HMRC operates IPR under the legal authority of the Union Customs Code. When Brexit occurs, the UK will need to put in place its own IPR regime. This is likely to mean, at least, changes to the “economic test” (which currently must take account of Union interests in all 28 Member States) and possibly the revival of “duty drawback”.

All companies which import goods for production and sale, especially if they have significant markets outside the Union, should consider whether IPR can help them reduce unnecessary customs duty costs.

4 Eyes Ltd has helped many IPR operators and applicants to maximise savings using IPR while minimising the administrative burden. We have assisted dozens of companies with IPR scoping and benefit analysis, applications and administration. Reviews of operating IPR schemes often identify significant new opportunities for savings. We also help to resolve problems discovered e.g. in course of HMRC audits of IPR operators.

If you are considering applying for IPR approval, would like to know more about the changes to IPR which will result from the UCC, or have any questions about IPR we welcome your call.