What Is Inward Processing Relief?
Posted by Stuart Thomason on 08 January 2014 08:44
What is IPR?
IPR is a trade facilitation initiative that entitles overseas businesses to return products to the UK, for repair or replacement, free from import/export fees.
This exemption is granted on the condition that goods are returned to Britain within six months of receiving them.
As an added benefit, IPR could also remove the requirement to pay VAT (Value Added Tax).
How does IPR benefit businesses?
It cuts import and export shipping costs. The fact is, any goods simply arriving in the UK will be subject to import duty and VAT, this is a legal requirement.
However, if you’re returning goods to Britain for the purpose of repair or replacement with a view to those goods being re-exported, businesses could qualify for import duty and VAT exemption thanks to the IPR initiative.
The IPR initiative benefits importer and exporter equally. For example the importer is able to keep their prices competitive and their cost savings can be passed onto customers who will ultimately re-export the goods.
In the same way, 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 acquire the relief and pass it onto the exporter.
The purpose of the entire IPR initiative is to benefit businesses by increasing European Community competitiveness in world trade.
Types of Inward Processing (IP)
There are two types of Inward Processing and Inward Processing Relief can be provided by way 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.
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, Galleon Systems recommends visiting www.gov.uk/inward-processing