Chemical Toll Manufacturers Pay the Price for Oversight of Post-Brexit HMRC Warnings

Since Brexit, many Toll Manufacturing (TM) businesses within the chemical industry have overlooked warnings issued by the HMRC regarding the necessity to register for Inward Processing (IP). With IP, goods remain under customs control and are not liable for import VAT if the goods are exported or put to other qualifying uses. Without IP, import VAT is not recoverable on transactions and businesses are facing shock VAT demands and penalties.

Although the HMRC has issued warning letters to flag the issue, many businesses have not taken on board the significance to their situation and, in some cases, businesses have reported not to have received the information at all. With import VAT at 20%, the exposure to liability can be highly significant and even business critical to many TMs. If HMRC decides to audit, it can demand import VAT dating back up to three years, which can be crippling to cashflow.

Whilst it has always been the case that IP is necessary for Toll Manufacturing, HMRC has become much more proactive in addressing it in the post Brexit trading environment. There are ways to overcome the issue, but often it slips through as an unidentified error.

IP is particularly relevant within the chemical industry as toll manufacturing forms an integral part of many businesses, typically involving the production of intermediates, speciality chemicals or finished products.

Adam Wood, Head of Commercial at Barbourne Brook commented:

“Unfortunately, many TMs are unaware of the risks and do not have the relevant in-house expertise to flag the issue. The complexity of IP implementation can vary enormously between businesses, as indeed can the level of exposure. TM’s need to take urgent action to understand the implications to their business as a first step to ensure they qualify for refunds/exemptions.”

Customs Planning Consultancy, Barbourne Brook, is currently offering a no-obligation consultation to chemical businesses feeling in the dark about how this could affect them. This first step can establish the size and scope of the issue and how best to proceed to de-risk the business.

To set up a no-obligation initial consultation contact Adam Wood on 0121 403 3901.

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For further information visit www.barbournebrook.co.uk or for media enquiries email jenny@barbournebrook.co.uk