What is Inward Processing Relief?
Inward Processing Relief is an HMRC authorisation allowing for relief on customs duty and import VAT on goods imported that are processed, and subsequently re-exported.
The Inwards Processing Relief Supply Chain
This type of relief is commonly used in manufacturing businesses, but can be applied effectively for most internationally trading businesses.
The length at which goods can be held under Inward Processing Relief differs depending on what is agreed with HMRC. This usually comes down to the amount of processing of the goods that takes place. For example, a simple exercise of taking the product out of a box and splitting it might be granted a 3-month Inward Processing Relief license. Conversely, a sophisticated manufacturing process, such as building a submarine, could be granted 12+ months.
Should I consider Inward Processing Relief for my business?
Internationally trading businesses can significantly reduce the cost of sales by using Inward Processing Relief and, therefore, increase margins. However, there are ongoing compliance obligations and administrative burdens that need to be taken into consideration.
Inward Processing Relief is just one customs planning technique of many. There is no way to know which technique suits your business without first fully understanding the supply chain. As such, we always recommend that if you are considering this project, you take a step back, consider what your project goals are and review all the options available.
The decision as to whether or not Inward Processing Relief is right for your business will come down to cost (financial and time invested) vs benefit (ongoing savings). We typically recommend that if the savings are upwards of £30,000 per annum, then it is logical to implement Inward Processing Relief.
The Inward Processing Relief Application Process
As the authorisation is granted by HMRC, the process will trigger an audit of your customs obligations. As such, before you make the approach, we recommend first doing a full review with our Customs Landscape service. Doing this will give the following benefits:
- A viability assessment of the project mapped against other solutions. This approach will ensure you make the right decision based on your specific supply chain.
- Uncover compliance risks allowing time to resolve them before you approach HMRC with an IPR application.
- Provide you with a gap analysis showing where you are now against where you need to be in order to successfully obtain an IPR authorisation.
Inward Processing Relief Application Process
Inward Processing Relief requires prior authorisation from HMRC and your business taking on additional compliance obligations. The process typically takes 3 months, but in exceptional circumstances, can be applied for with retrospective effect. The process should look like this:
Fixing any compliance issues uncovered from the Inward Processing Customs Landscape review.
Determining the most appropriate Inward Processing Relief configuration for your business, including how you deal with scrap, the use of simplifications such as First In First Out and Equivalence, which maximise any customs charge and VAT savings and reduce compliance complexity.
Complete the necessary HMRC and third-party affiliated application forms and questionnaires.
Build the Inward Processing Relief systems, mapping data-flows, interfacing the commercial and customs systems, etc.
Draft the necessary document landscape, including audit trails, control of master data, transaction flows, working instructions bolstering your validity within the Inwards Processing field.
Managing HMRC involvement through the process, addressing initial questions on the application, addressing points coming out of their application audit, and reviewing any authorisation to ensure it conforms with HMRC regulation and what you applied for.
Training staff to operate the Inward Processing and ancillary compliance obligations coming out of the authorisation, including spotting errors, managing business and regulatory changes, etc.
What Are The Ongoing Requirements Should My Business Implement Inward Processing Relief?
It is important to note that IPR will create additional administration and compliance obligations.
Some of these to consider are:
- Ensuring that goods are put through IPR within the time limits set by customs to avoid additional charges. The greater level of processing, the longer HMRC grant the license.
- Submitting period returns known as Bills of Discharge of goods imported and through IPR.
Releasing no-qualifying import or export goods and paying the necessary duty on them. - Ensuring the goods are imported and, if relevant, exported correctly, quoting the necessary HMRC and customs duty authorisation details and specific customs procedure codes.
- Maintaining audit trails and supporting documentation (both customs and commercial) to be HMRC audit-ready.
Could We do This In-House?
The answer to this depends on whether or not you have sufficient in-house expertise and time to manage this complex project. We would strongly recommend that if you do not have expertise within your team who is familiar with setting up IPR, then you take professional advice. There are common mistakes and bear traps to avoid which ensures IPR will have the best bottom-line impact and not cause serious compliance issues going forward.
We have helped many clients obtain permission from HMRC to carry out Inward Processing Relief. However, obtaining permission to operate Inwards Processing Relief is only one part of a wider project to ensure it is fully optimised, accurate and future proof. A common mistake made is that businesses only focus on the application and form-filling exercise whilst neglecting the wider project. This leaves significant exposure with regards to ongoing obligations and usually means the savings obtained are not maximised. Therefore, Barbourne Brook rarely engages in an Inward Processing Relief project without first completing a Customs Landscape project.
Why Choose Barbourne Brook
Our tried and tested methodology has successfully achieved Inward Processing Relief authorisation many times. Our assistance streamlines the application process by giving you a clear roadmap and helping you avoid common mistakes.
Our consultants are made up of ex-big 4 accountants, lawyers, customs and logistics professionals meaning we have a unique view on an often complex and misunderstood area. The wealth of experience within the team will ensure you end up with the best Inward Processing Relief solution for your business that maximises savings and minimises compliance costs and risks.
Find out if Inward Processing is right for you.
For a free one hour consultation, fill out our form below and our Head of Commercial, Adam Wood, will be in touch with you.
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