What is IPR?
Inward Processing Relief (IPR) is a UK customs special procedure that lets you import goods from outside the UK, carry out a process on them, such as manufacturing, repair, or incorporation into another product, and then re-export the finished goods without paying import duty on the materials you brought in. Duty is suspended while the goods are in the UK. If you re-export within the allowed time limit, you pay nothing. If you do not re-export, you pay the duty that was suspended.
If your business imports raw materials, components, or parts from outside the UK, processes them, and then sends the finished product abroad. IPR could save you a major amount in import duty.
Many businesses pay duty on imported materials without realising they do not have to. IPR exists precisely to fix this. It is a legitimate, HMRC-approved customs procedure used across UK manufacturing, aerospace, food processing, textiles, and many other industries.
This article explains how IPR works, how to get authorised, what you need to do to stay compliant, and what changed after Brexit.
IPR is one of a group of UK customs special procedures that allow businesses to use imported goods under specific conditions without paying the full import duty upfront.
The key idea is simple. If you are importing materials to process them and then export the result, the UK government does not want to tax you on those materials. The duty would make you less competitive against businesses in countries that do not face that cost. IPR removes the duty burden on the imported element, as long as the goods genuinely leave the UK after processing.
IPR is governed by UK Trade Tariff legislation and administered by HMRC. Since Brexit, the UK IPR procedure operates independently from the EU’s equivalent procedure. The two are no longer linked.
You need a formal HMRC authorisation before you can use IPR. You cannot apply it retrospectively to shipments that have already cleared customs.
The basic flow works like this.
You apply to HMRC for IPR authorisation. Once authorised, you import goods from outside the UK under the IPR procedure. You declare this on your import customs declaration in the Customs Declaration Service (CDS). Duty is suspended, not waived, while the goods are in your possession.
You carry out the agreed process: manufacturing, repair, testing, or whatever your authorisation covers.
You then export the processed goods. At the point of export, the suspended duty is discharged. Because the goods have left the UK, no duty is owed. You submit a Bill of Discharge to HMRC to confirm that the imported goods have been accounted for.
If you do not export within your authorised time limit, the duty becomes due. HMRC will expect payment of the suspended duty on any goods that cannot be accounted for.
The range of qualifying processes is broad. HMRC uses the term “processing operations” to cover activities that change the nature, composition, or condition of goods.
Common examples include:
What does not qualify is simply storing goods and re-exporting them unchanged. That falls under customs warehousing, which is a different special procedure.
If you are unsure whether your process qualifies, HMRC’s guidance and your customs broker can advise before you apply.
Any UK-established business can apply for IPR authorisation, provided HMRC is satisfied that:
You must hold a valid UK EORI (Economic Operators Registration and Identification) number. This is essential for any customs activity in the UK.
Subcontractors can also hold IPR authorisation if they are carrying out processing on behalf of someone else.
Freight forwarders and customs brokers cannot hold IPR on your behalf, the authorisation must be in your name as the business carrying out the processing.
You apply for IPR authorisation online via the HMRC Customs Decisions system. This replaced the older C&E 810 paper form.
Before you apply, you will need to have ready:
HMRC will assess your application. For straightforward cases, common processes with no economic conditions concerns, decisions can be issued within 30 days, though you should allow longer in practice.
Your authorisation will specify the goods covered, the processes allowed, the time limit for discharge, and any conditions you must meet. Read it carefully. Operating outside the scope of your authorisation is a compliance risk.
Once authorised, you declare the IPR procedure on each import declaration in CDS using the correct Customs Procedure Code (CPC). Your customs broker or freight forwarder can help you get this right.
There are two ways to use IPR, and they work very differently.
This is by far the more common approach. Under the suspension system, you declare goods into IPR at the point of import, and duty is suspended from the start. You never pay the duty if you re-export within the time limit.
This is the best option for most businesses. You preserve your cash flow because duty is never collected in the first place.
Under the drawback system, you pay the import duty when the goods enter the UK, as a normal import. You then carry out your processing and re-export the goods. After re-export, you claim a refund of the duty you paid.
The drawback system is less common. It ties up cash that you later have to reclaim. The main reason to use it is when you did not have IPR authorisation in place at the time of import and you want to reclaim duty retrospectively.
There are strict time limits for making a drawback claim. You must apply before the goods leave the UK, and the claim must be submitted within the required window.
For new IPR users, the suspension system is almost always the right choice. Get authorised before your goods arrive.
The Bill of Discharge (BoD) is the document that closes out your IPR account with HMRC. It is your formal proof that you have accounted for all goods that entered the UK under your IPR authorisation during a given period.
You submit a Bill of Discharge to HMRC at the end of your discharge period, typically every six months, though your authorisation will specify the exact requirement. The BoD sets out:
HMRC uses the BoD to check that the duty suspension has been properly managed. If you cannot account for all the goods, if quantities do not add up. HMRC may raise a duty debt for the missing amount.
Good record-keeping is essential. You need to be able to trace every kilogram, unit, or item that enters your operation under IPR through to its eventual destination. This is called your IPR records or your processing accounts, and HMRC can inspect them at any time.
Once goods enter the UK under the IPR suspension procedure, the clock starts. HMRC sets a time limit within which you must discharge the IPR, meaning you must re-export the processed goods and submit your Bill of Discharge.
The standard time limit is six months from the date the goods were entered into the IPR procedure.
This is enough time for most manufacturing and repair operations. However, some products involve longer production cycles. You can apply to HMRC for an extended time limit if your process genuinely takes longer. Extensions are granted where there is a valid commercial reason, but they are not automatic, you must request them before the original period expires.
If your time limit passes and you have not re-exported or accounted for the goods, HMRC will treat the unaccounted goods as released to free circulation. Duty and import VAT will become immediately due on those goods.
Keep a diary of your IPR deadlines. Missing a discharge deadline is one of the most common IPR compliance failures.
One of the more useful, and slightly complex, features of IPR is the concept of equivalent goods.
Normally, IPR attaches to the specific goods you imported. You import a specific batch of aluminium sheets from Japan, you use those sheets in your product, and you export the product. Simple.
But in manufacturing, it is not always practical to keep imported goods physically separate from UK-sourced goods of the same type and quality. If you hold a mix of imported and domestically-sourced steel coil, for instance, keeping them in separate batches can be operationally difficult.
Equivalent goods provisions allow you to use UK-origin goods (or goods from another source) in your production, treat them as the “IPR goods,” and export those, while the actual imported goods remain in stock. The goods must be equivalent in terms of commodity code, quality, and technical characteristics.
Your authorisation must specifically permit equivalent goods for you to use this approach. Not all IPR authorisations include it.
There is also a “prior export” option within equivalent goods, which allows you to export the finished product before you actually import the overseas goods. This is an advanced option and requires careful management of records and timelines.
IPR is a powerful tool but it requires discipline. These are the mistakes that cause the most problems.
Not having authorisation before importing. IPR cannot be applied retroactively to goods that have already been imported under normal procedures (except via the drawback route). If you start importing and declare goods under IPR without an authorisation, HMRC can reject the declaration and the full duty becomes due.
Missing the discharge deadline. Six months passes quickly when production is busy. If you do not re-export and submit your Bill of Discharge in time, duty becomes due automatically.
Poor record-keeping. HMRC expects you to be able to account for every item that enters under IPR. If your records cannot reconcile the imports to the exports, you are exposed to a duty debt.
Operating outside authorisation scope. Your authorisation specifies which goods and which processes are covered. Using IPR for goods or processes not listed in your authorisation, even similar ones, is a compliance breach.
Using the wrong CPC code on import declarations. The wrong Customs Procedure Code on a CDS declaration means the goods are not legally entered into IPR. Check with your customs broker before each import.
Not notifying HMRC of changes. If your processes, volumes, or goods change materially, you should update your authorisation. Using an out-of-date authorisation creates risk at audit.
IPR and Outward Processing Relief (OPR) are mirror images of each other.
| Feature | IPR | OPR |
|---|---|---|
| Direction of goods | Imported into the UK for processing | Exported from the UK for processing abroad |
| Duty relief applies to | Import duty on the incoming materials | Duty on re-imported processed goods (only duty on the added value) |
| Who benefits | UK businesses that process foreign materials | UK businesses that send goods abroad for cheaper processing |
| Re-export required | Yes — finished goods must leave the UK | Yes — processed goods must return to the UK |
| HMRC authorisation | Required before import | Required before export |
In short: IPR relieves duty on the inputs coming in. OPR relieves duty on the value added abroad when goods come back.
If you manufacture in the UK using imported components and then export the product, IPR is the relevant procedure. If you send UK goods to be processed in another country and reimport them, OPR is what you need.
Before Brexit, the UK was part of the EU’s customs union. Inward Processing in the EU covered the entire EU territory, and goods processed in the UK could circulate freely within the EU without additional duty.
That changed on 1 January 2021. The UK now has its own separate IPR procedure, governed by UK law and administered by HMRC. The EU has its own separate Inward Processing procedure for EU-based businesses.
The key practical changes are:
UK IPR no longer covers the EU. If you import goods into the UK under UK IPR, process them, and then export them to the EU, the EU will treat that as a standard import. Your EU customer may face EU import duty on the finished goods entering the bloc.
UK goods re-entering the EU are treated as third-country imports. Post-Brexit, UK-origin goods do not benefit from EU customs union treatment. If you export processed goods to the EU, you and your customer need to consider EU import duty and the EU-UK Trade and Cooperation Agreement (TCA) rules of origin carefully.
Existing EU IP authorisations ceased to apply in the UK. If you held an EU Inward Processing authorisation before Brexit, that ceased to cover UK operations from 1 January 2021. You needed to apply for a separate UK authorisation from HMRC.
The UK Global Tariff (UKGT) now applies. The duty rate that would apply if IPR were not used is the UKGT rate, not the EU Common External Tariff. These rates can differ.
For businesses trading between the UK and EU, the post-Brexit position adds complexity. Your customs broker or trade adviser can help you model the duty impact of different supply chain configurations.
Here is how IPR works in practice for a UK manufacturer.
The scenario. A UK aerospace components manufacturer, based in the West Midlands, imports specialist titanium billets from Japan. The billets arrive in the UK, are machined into precision engine components, and the finished components are exported to an airline customer in Germany.
Without IPR. The titanium billets are subject to UK import duty. Suppose the shipment is worth £120,000 and the applicable duty rate is 5.5%. That is £6,600 in duty per shipment. The manufacturer imports six shipments per year, a duty cost of £39,600 annually. This cost is either absorbed into the business margin or added to the product price, making the manufacturer less competitive.
With IPR. The manufacturer applies for IPR authorisation from HMRC. The application is approved, covering titanium billets under the relevant commodity codes, with machining and finishing as the permitted processes. The time limit is six months.
Each shipment of billets is now declared into IPR on the CDS import declaration. Duty is suspended, the £6,600 per shipment is not collected. The manufacturer machines the billets over the following weeks. The finished components are exported to Germany. A Bill of Discharge is submitted to HMRC at the end of the six-month period, confirming all billets have been accounted for through exports.
The saving. £39,600 per year in import duty is no longer paid. That money stays in the business, improving margin, pricing competitiveness, or cash flow. The administrative overhead of managing IPR records and submitting Bills of Discharge is real, but easily justified against a saving of this size.
The post-Brexit consideration. When the finished components enter Germany, the German importer will need to import them through EU customs. Under the EU-UK Trade and Cooperation Agreement, goods with enough UK or EU origin content may qualify for zero-duty entry under the TCA preferential rate, but the rules of origin test applies. The manufacturer needs to confirm with their customer and customs adviser that the finished components meet the TCA rules of origin requirements.
Do I need to pay VAT on goods I import under IPR?
Import VAT is also suspended under the IPR suspension procedure, in the same way as import duty. If you re-export the processed goods, import VAT is not collected. This provides an additional cash flow benefit, since import VAT (unlike duty) can normally be reclaimed by VAT-registered businesses, but the suspension means you never have to pay it and wait for a refund in the first place.
Can I use IPR for goods I repair for an overseas customer?
Yes. Repair is one of the most common uses of IPR. If an overseas customer sends you goods to repair and you return them after repair, IPR covers the process. The goods must be returned to the customer outside the UK. You cannot use IPR for repairs on goods that will remain in the UK.
How long does HMRC take to process an IPR application?
HMRC aims to process IPR applications within 30 calendar days for straightforward cases. Complex cases: for example, those involving an economic conditions test, can take longer. Apply well in advance of when you need to start importing. Do not wait until goods are already on the water.
Can I use IPR if I use a subcontractor for part of the processing?
Yes, in most cases. Your authorisation can cover processing carried out by subcontractors on your behalf, provided this is declared in your application and HMRC approves it. The subcontractor does not need their own IPR authorisation in this scenario, but you, as the authorisation holder, remain responsible for all compliance.
What happens if I cannot re-export all the processed goods?
If some goods cannot be re-exported: for example, because of production waste, defective output that is scrapped in the UK, or a customer cancellation, those goods must be accounted for in your Bill of Discharge. For goods released to free circulation (kept in the UK), duty is due. Goods that are destroyed under customs supervision may be discharged without duty. HMRC’s guidance covers the specific treatments available.
Is IPR available for goods that are simply re-exported unchanged?
No. If you are simply storing goods and re-exporting them without any processing, IPR does not apply. Customs Warehousing is the relevant procedure for unprocessed goods held for re-export.
Do I need a separate IPR authorisation for each product I import?
Not necessarily. A single IPR authorisation can cover multiple goods and multiple processes, provided they are all specified in the application. If your product range changes after authorisation, you should apply to amend your authorisation rather than assume it covers new goods automatically.
What is a Customs Procedure Code (CPC) and why does it matter for IPR?
A Customs Procedure Code is a numeric code entered on your CDS customs declaration that tells HMRC what customs regime applies to the goods. For IPR, the correct CPC tells the system that duty should be suspended rather than collected. Using the wrong CPC means the goods are not entered into IPR, and duty will be charged as normal. Your customs broker manages the CPC, but it is worth understanding its importance.
For official HMRC guidance, see the Apply to delay or pay less duty on goods you import to process or repair page and the Special procedure: inward processing guidance on GOV.UK.
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