Claiming Relief from Import Duties and Taxes

Duty Management and Inward Processing

Duty and Tax Management

An important commercial consideration for businesses importing goods is their supply chain costs, which include duties and taxes. Importers do not always take full advantage of import procedures that can reduce or eliminate duties and taxes altogether on imported goods. The incorrect classification of imported goods can result in duties being paid incorrectly or the advantages of preferential trade agreements not being realised.

Depending on what you intend to do with your imported goods, you may reduce or eliminate duty and import VAT payments.

• Importing samples, professional equipment, exhibition goods and demonstration goods temporarily into the UK will not require any duty or VAT payments.
• Many imported medical or scientific goods are not dutiable and many are zero rated for VAT.
• You can claim import duty and VAT relief on goods for commercial research.
• You may not need to pay duty on free circulation goods you have exported and then re-imported.

If you are importing goods for processing or repair prior to re-exporting them, then you can use Inward Processing to reduce or avoid import duty and VAT payments. Let's take a look at Inward Processing (IP) in more detail.

What is Inward Processing (IP)?

IP is a duty suspension procedure, which enables UK businesses to import goods for processing or repair and to re-export them without paying import duties and taxes. Also, under IP you can postpone paying any excise duty on the imported goods you are processing. If you decide to keep some or all the imported goods within the UK and place them into free circulation, then duties and taxes will be applicable. However, due to the processes conducted on your goods you may pay a reduced amount of duty and import VAT than was originally due on the imported goods.

For some business sectors, such as telecommunications, IP can be an essential consideration as they regularly receive products that require repair, servicing or calibration. The use of IP relieves these businesses of any customs duty payments and avoids potential VAT issues.

What is Free Circulation?

Goods are in free circulation when import formalities have been fulfilled and the goods have been cleared by customs, duties and taxes have been paid and the goods are without any customs restrictions.

What is the definition of Processing?

HMRC state that processing can be anything from simply sorting or repacking goods up to the most complicated manufacturing.

What is the definition of Repair?

HMRC state repair is when goods are restored to their original working condition, but do not improve their performance. If you want to claim relief on goods for repair, you need to expect the goods to be repairable. This means they cannot be things like minerals and chemicals. You can import or export goods for repair.

Who can apply for Inward Processing?

To use Inward Processing, you will need to apply and you will need:

• to be established in the UK
• an Economic Operator Registration and Identification (EORI) number
• to check if you need a guarantee
• to check if you need an import licence

Inward Processing Authorisations

HMRC have four types of inward processing you can apply to use:

• full
• retrospective
• by declaration
• authorisations covering Northern Ireland and the EU

Further assistance with Inward Processing

I can provide further advice and guidance with all aspects of Inward Processing, including how to reduce your duty payments. For more information, please contact me on 0118 932 8447 or by e-mail:  info@icsglobalservices.co.uk

Ian Simmonds

ICS Global Services