Toll Manufacturers Pay the Price for Oversight of Post Brexit Inward Processing Need

Post Brexit, many Toll Manufacturing (TM) businesses have overlooked warnings issued by the HMRC regarding the necessity to register for Inward Processing (IP) and are now starting to pay the price, with surprise VAT demands and penalties, according customs duty consultancy Barbourne Brook.

Many TM businesses do not realise that import VAT is not recoverable on transactions, as goods are imported for processing without taking title (toll contracts) and then later re-exported. Whilst this has always been the case, HMRC has become much more proactive in the post Brexit trading environment. One solution is to import goods under IP, where they remain under customs control and are not liable for import VAT.

HMRC Warnings And The Responses From Businesses

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 tax 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.

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.”

Barbourne Brook is currently offering a no-obligation opening consultation to 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.

Click here to make an appointment for a consultation.