What Is Inward Processing Relief?
Posted by on 08 January 2014 10:23

What is IPR?

The IPR initiative was introduced to facilitate trade, allowing overseas organisations to return goods to the UK for the purpose of repair or replacement, free from import/export costs.

The exemption from import/exports costs is authorised on the condition that goods being returned to the UK are sent back for repair or replacement within six (6) months of receiving them.

A further benefit of IPR is exemption from paying VAT (Value Added Tax).

How does IPR benefit businesses?

It reduces the cost of importing and exporting goods in need of repair or replacement. The fact is, any goods simply arriving into Britain incur import duty fees and VAT costs, this is a legal requirement.

However, if goods sent back to the UK are returned for the purpose of repair or replacement, then subsequently re-exported, businesses could be eligible for import duty and VAT exemption as a result of the IPR initiative.

IPR benefits importer and exporter equally. For instance, the importer is able to keep their prices competitive whilst passing on their cost savings to customers who will ultimately re-export the goods. This serves to improve business relations and promote fairness.

Exporters are also a beneficiary of the IPR initiative. Should a business be the final exporter, purchasing goods that originate from outside the European Community (EC) from another party based in Britain/the EC, they can receive the relief and pass it onto the exporter.

The aim of the IPR initiative is to benefit businesses by increasing European Community competitiveness in world trade.

Types of Inward Processing (IP)

There are two categories of Inward Processing and IPR can be provided in the form of suspension or drawback.

IP Suspension – UK customs duties are suspended when returned goods are first entered into the IP system. Suspension is considered the most suitable method for traders re-exporting all imported goods after processing.

IP Drawback – IP drawback means that a business pays the initial customs duties, and other costs, when the imported goods are first entered into the IP system. It is then possible to claim back duty expenses when exporting them after processing. Drawback is considered most suitable for traders intending to export goods.

Qualifying for IPR

To claim exemption from import/export fees and VAT using the IPR initiative you will require authorisation from UK customs.


Understanding Authorisations

There are five types of Inward Processing authorisation:

#1 – Simplified authorisation – allows companies to enter goods into IP without making a prior application for authorisation.

#2 – Local authorisation – for use by companies that use the IP system on a regular basis.

#3 – Specific authorisation – for use by companies that need to show why they are unable to use goods produced in the EU rather than importing from outside.

#4 – Single community authorisation – for use by companies if IP goods are to be processed in more than one member state of the EU.

#5 – Integrated authorisation – covers authorisation for IP and other customs procedures with economic impact.

For a more detailed explanation of Inward Processing authorisation and IPR relief, Armagard recommends visiting www.gov.uk/inward-processing

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