Manufacturers, processors and repairers apply for Inward Processing Relief to suspend duty on the imported goods they work on.
KEY TAKEAWAY
Inward Processing Relief allows UK businesses to import goods, process or manufacture them, and pay import duty only on the portion sold into the UK market, or pay nothing at all if the finished goods are exported. Applying requires an HMRC authorisation, either a full authorisation applied for online or an authorisation by declaration for occasional use. This guide covers every step.
If your business imports raw materials, components or semi finished goods for manufacturing, processing or repair, and then exports the finished product or sells part of it in the UK, Inward Processing Relief could be saving you significant amounts in import duty and VAT right now.
The challenge is the application. Many businesses know IPR exists but assume it is too complex, or apply without proper preparation and find themselves delayed or refused by HMRC. This guide walks through the whole process, from checking eligibility to staying compliant once authorised.
What is Inward Processing Relief and who is it for?
Inward Processing Relief is an HMRC customs special procedure that suspends import duty and import VAT on goods brought into the UK for processing, manufacture or repair. Duty only becomes payable on goods released into free circulation, meaning sold into the UK market. Goods that are exported never pay it.
IPR is designed for businesses that:
Import raw materials or components to manufacture a finished product
Import goods for repair or refurbishment before sending them back abroad
Import goods for processing where some or all of the output will be exported
Make a finished product that carries a lower duty rate than the imported materials
If you manufacture in the UK using imported materials, or repair goods for overseas clients, IPR very likely applies. The real question is rarely whether you are eligible. It is whether your systems are ready to support an application.
Before you apply: eligibility and pre application checks
HMRC assesses every application against a set of criteria. Working through these first gives you a much better chance of a clean, quick approval.
Economic conditions test
For most applications, HMRC checks that using IPR will not unfairly undercut UK producers of equivalent goods. For many commodities this is met automatically. For others HMRC assesses it as part of your application, and we can confirm in advance which applies to your goods.
Customs compliance record
HMRC will check your compliance history. Recent customs penalties, outstanding debts or a pattern of declaration errors will bring extra scrutiny. If your record has issues, deal with them first, ideally through a voluntary disclosure.
Record keeping readiness
This is where most applications run into problems. HMRC needs you to account for every unit entering and leaving the procedure. Your systems must be able to:
Track goods from import through production to export or UK sale
Produce a Bill of Discharge each period, usually quarterly, within 30 days of it ending
Reconcile commercial and customs records line by line
Show rates of yield and wastage for each manufacturing process
If your systems cannot do this today, fix it before applying. An authorisation you cannot comply with in practice creates real HMRC risk.
Not sure if your business qualifies for IPR or whether your systems are ready? We offer a free gap analysis before any application.
Book a free consultationThe IPR application process, step by step
Step 1: Define your procedure, goods and route
Set out exactly which goods you will import, their commodity codes and the process they will go through. This is the core of your application, and vague descriptions attract more HMRC questions.
Then choose your route:
Step 2: Submit your application to HMRC
A full authorisation is applied for online through GOV.UK, at least one month before your first import. You will need your EORI number, details of the goods and processes, evidence of your record keeping and an estimate of annual volumes. With authorisation by declaration, the import declaration itself acts as the application.
HMRC usually comes back with follow up questions. How quickly and clearly you answer them has the biggest effect on your timeline. Well prepared applications with fast responses are typically authorised within around three months. Slow or vague answers can stretch that considerably.
Step 3: Answer HMRC's questions thoroughly
Nearly every IPR application gets at least one round of questions. They usually cover:
The process itself, and how the imported goods relate to the finished products
Your record keeping and how you will track goods through the procedure
How you will prepare and submit your Bills of Discharge
Answer every question in writing, specifically. If HMRC asks how you track yield, point to the system you actually use today.
Step 4: Put your IPR record keeping in place
Your authorisation sets the conditions you must meet. Before it goes live, make sure you have:
An IPR stock account or ledger for goods entering and leaving the procedure
A way to link each import entry to specific production batches
A rate of yield method agreed with your operations team
A Bill of Discharge process: who prepares it, when, and where records are kept
A way to report lost, damaged or stolen goods, or yield outside expected levels
Step 5: Submit your first Bill of Discharge
Once you are trading under IPR, a Bill of Discharge is due for each discharge period, usually quarterly, within 30 days of the period ending. It reconciles your imports against exports and UK sales, and accounts for waste and yield loss.
The first one is often the hardest. If your systems were not fully ready at go live, the first reconciliation will expose the gaps. It is far better to find and fix these before you submit than to have HMRC raise them afterwards.
Common reasons IPR applications are delayed or refused
| Issue | What HMRC looks for instead |
|---|---|
| Record keeping cannot produce a Bill of Discharge | Named systems and processes already in use |
| Rates of yield not defined or evidenced | Historical production data showing input to output ratios |
| Economic conditions not addressed | Evidence that IPR use does not undercut UK producers |
| EORI or company details inconsistent | An exact match between HMRC records and the applicant |
| Slow responses to HMRC questions | Prompt, complete replies, since every delay extends the timeline |
| Compliance history issues not disclosed | Voluntary disclosure with evidence of what was fixed |
Staying compliant once authorised
An IPR authorisation is not a one off task. HMRC monitors authorised businesses, and compliance is ongoing. You need to:
Submit each Bill of Discharge accurately, usually quarterly, within 30 days of the period ending
Tell HMRC straight away about material changes to your processes, premises or ownership
Keep all IPR records for at least four years
Make sure your declarant uses the correct procedure codes on every IPR import
Make sure goods leave the procedure within the discharge period in your authorisation
Many businesses hand this ongoing work to us under Monthly Customs Management, for one fixed monthly fee.
If you cannot account for goods that entered the procedure, HMRC will demand the full suspended duty and VAT, often across several years of imports. It happens routinely when IPR is poorly managed.
How much can IPR save your business?
It depends on your volumes, commodity codes and how much you export. As an example, a UK manufacturer importing £500,000 of raw materials a year at an average 4% duty rate pays £20,000 a year in import duty. If 70% of the finished goods are exported, IPR removes £14,000 of that, every year.
Higher duty rates, larger volumes or a higher export share scale the saving further. The application is a one off cost. The saving repeats every year the authorisation is in place.
Should you use a consultant or apply alone?
You can apply for IPR without a consultant. HMRC's process is documented and the form is accessible. But unassisted applications often stall at the record keeping evidence stage, and a delayed or refused application means months more of duty that IPR would have suspended.
A specialist knows exactly what HMRC looks for at each stage, answers questions before they are raised, and closes the gap between your current records and what the authorisation requires, often before you submit.
The real question is whether the saving justifies expert help. If you pay at least £500 a month in import duty on goods that could qualify, the answer is almost always yes.
Readyset manages the full IPR process, from the first gap analysis to authorisation and every Bill of Discharge.
Frequently asked questions
How long does it take to get IPR authorisation?
HMRC asks for full applications at least one month before your first import. A well prepared application with prompt answers to HMRC's questions is typically authorised within around three months.
Where do I find my IPR authorisation number?
It is on the authorisation HMRC issues to you. The number is quoted on every import declaration that places goods into Inward Processing, so your declarant needs it before the first shipment arrives.
Is Inward Processing the same as duty drawback?
No. Drawback means paying duty at import and claiming it back after export. The UK has no general duty drawback scheme, so Inward Processing is how businesses avoid duty on goods they process and export. The duty is suspended at import instead of being paid and reclaimed.
Can I apply for IPR retrospectively?
Only in exceptional circumstances. HMRC can backdate an authorisation by up to 12 months, or 3 months for sensitive goods, and only if you have not had a retrospective authorisation in the last 3 years.
