Key Takeaways
- Inward Processing Relief (IPR) suspends Customs Duty and import VAT on goods imported for processing or repair, then re-exported outside the UK.
- Outward Processing Relief (OPR) reduces duty on goods exported from the UK for processing or repair, then re-imported.
- Full authorisation takes up to 3 years for sensitive goods, 5 years for others — apply at least one month before your first import.
- Authorisation by Declaration (AbD) offers a simplified route: up to 10 times per rolling year, max £500,000 per consignment, with a refundable guarantee.
- You must specify a rate of yield — the ratio of processed products to imported goods — for each processing operation.
- HMRC can cancel existing authorisations if they disadvantage UK producers following an economic conditions examination.
What Are Customs Special Procedures?
Special procedures are customs regimes that allow you to suspend, reduce, or eliminate Customs Duty and import VAT on goods moving into or out of the UK for specific purposes. For UK manufacturers, repairers, and processors, Inward Processing Relief (IPR) and Outward Processing Relief (OPR) are the two most relevant mechanisms.
IPR lets you import goods from outside the UK without paying duty upfront, process or repair them here, then re-export them. If the processed goods stay in the UK instead, you may pay duty — potentially at a reduced rate if the finished product attracts a lower duty rate than the raw materials you imported.
OPR works in reverse: you export UK goods for processing or repair abroad, then re-import them with reduced duty calculated on the overseas processing cost rather than the full value of the goods.
Both reliefs require authorisation from HMRC. You cannot simply declare goods under these regimes without prior approval, except in limited circumstances using Authorisation by Declaration at the border. For broader context on how these regimes sit within the UK customs framework, see our customs clearance step-by-step guide.
Inward Processing Relief (IPR)
How IPR Works
Under Inward Processing Relief, you import goods from outside the UK and suspend Customs Duty and import VAT. You then process, repair, or transform those goods within the UK. Once processing is complete, you re-export the goods outside the UK. Because the goods never enter free circulation in the UK, no duty is due.
If you decide to release the processed goods to free circulation in the UK instead of re-exporting them, you must pay duty. You can choose to be assessed on either the value of the imported goods at the time of import or the value of the processed goods at the time of release — whichever is more favourable. HMRC may dictate which basis applies if your choice would significantly affect the economic impact on UK producers.
This mechanism is particularly valuable for UK manufacturers who import raw materials or components, add value through processing, then export the finished product. Without IPR, you would pay duty on the imported materials and receive no relief when exporting the finished goods. For a full breakdown of how duty rates are calculated, see our import duty complete guide.
Who Can Apply for IPR
To qualify for Inward Processing Relief, you must meet several prerequisites:
- UK establishment: You must be established in the UK. Non-UK businesses can only apply for non-commercial imports.
- EORI number: You need a valid GB EORI number starting with GB followed by 12 digits and a 3-digit suffix. See our EORI number complete guide for registration steps.
- Good compliance history: HMRC will review your customs compliance record. Significant breaches may disqualify you.
- Guarantee: You may need to provide a financial guarantee covering suspended duties, though this is often waived for businesses with prior authorisation and strong compliance.
- Import licence: Certain controlled goods require specific import licences in addition to IPR authorisation.
Freight forwarders, customs agents, and express operators cannot apply in their own right — the authorisation must be held by the business that owns or controls the goods being processed.
Application Routes for IPR
HMRC offers four authorisation routes for Inward Processing, each suited to different operational needs:
Full authorisation is the standard route for regular users. You apply at least one month before your first intended import. If approved, you receive an authorisation reference number valid for up to 3 years for sensitive goods or 5 years for all other goods. Once you have full authorisation, you typically do not need to provide a guarantee for each import.
Retrospective authorisation is available in exceptional circumstances where you failed to apply before importing. You can request authorisation backdated up to 12 months (3 months for sensitive goods). However, lack of knowledge alone does not qualify as reasonable grounds. You must not have received retrospective authorisation in the previous 3 years. This route is intended for genuine oversights, not systematic non-compliance.
Authorisation by Declaration (AbD) allows you to obtain relief at the border without prior authorisation. You can use AbD up to 10 times per rolling 12-month period, with a maximum value of £500,000 per consignment. You must provide a refundable security deposit covering the suspended duties. AbD cannot be used for economic codes 5, 6, 7, 8, or 12, controlled goods, works of art, excise goods, or meat products intended for airline meals. A significant liberalisation took effect on 16 July 2025, increasing the AbD limit from 3 to 10 uses per year.
Northern Ireland and EU multi-state authorisation is available if you have processing sites in both Northern Ireland and EU member states. You apply via email to admin.uum.cdms@hmrc.gov.uk for a single authorisation covering all locations. This is a niche but important option for businesses with cross-border processing operations post-Windsor Framework.
Rate of Yield Requirements
Every IPR authorisation requires you to specify the expected rate of yield — the ratio of processed products to imported goods. This allows HMRC to verify that the quantity of goods you re-export matches what should have been produced from the imported materials.
For example, if you import 300 metres of fabric and produce 100 garments, your rate of yield is 3:1. For repair operations, the rate is typically 1:1 since the same item goes out for repair and returns. Each distinct processing operation under your authorisation must have its own rate of yield recorded.
HMRC uses this information to detect potential diversion of goods into free circulation without duty payment. If your actual yield consistently deviates from the declared rate, you may face compliance queries or authorisation review.
Economic Conditions Examination
HMRC may examine whether granting you IPR authorisation would disadvantage UK producers of similar goods. This economic conditions examination assesses whether your ability to import duty-free materials would harm domestic manufacturers who must pay duty on their inputs or source materials locally at higher cost.
If HMRC determines that your authorisation would adversely affect UK producers, they can amend or withdraw your application. Critically, they can also cancel existing authorisations if economic conditions change or if complaints from UK producers are upheld. This is a key compliance risk — even businesses with long-standing authorisations can lose them if HMRC’s economic assessment turns negative.
Sensitive goods are those with the biggest potential economic impact on UK producers. The sensitive goods list is maintained by HMRC and determines whether your authorisation is limited to 3 years rather than 5 years. You should check this list before applying, as sensitive goods also have stricter rules on retrospective authorisation (maximum 3 months backdating instead of 12).
Production Accessories Relief
IPR also covers certain production accessories — goods used in the processing operation but not incorporated into the final product. Relief is available for:
- Catalysts and chemical accelerators, retarders, or arresters
- Goods that protect products during processing
- Goods that create the correct environment for processing (e.g., inert gases, specialised atmospheres)
Relief is NOT available for fuels, energy sources, or lubricants — except when these are used for testing or manufacturing processes where they are consumed or transformed. This distinction matters for industries such as chemical processing, metal treatment, or pharmaceuticals where specialised environments are required.
Practical Example: UK Garment Manufacturer
A UK-based garment manufacturer imports 5,000 metres of cotton fabric from Turkey (outside the UK customs territory). The fabric is classified under HS code 5208 with a 12% duty rate. Without IPR, the manufacturer would pay £6,000 in duty on a £50,000 import.
With IPR authorisation, the manufacturer suspends the £6,000 duty. The fabric is cut and sewn into 1,250 shirts (rate of yield 4:1). The shirts are then exported to the United States. No duty is ever paid because the goods never entered UK free circulation.
If the manufacturer instead decides to sell 250 shirts in the UK market, they must release those goods to free circulation. They can choose to pay duty based on the value of the fabric used (500 metres at 12%) or the value of the finished shirts. If the shirts attract a lower duty rate than the fabric, the manufacturer benefits from the difference.
Outward Processing Relief (OPR)
How OPR Works
Outward Processing Relief allows you to export goods from the UK for processing or repair outside the UK, then re-import them with reduced duty. The duty is calculated on the cost of the overseas processing operation rather than the full value of the goods when they return.
You do not need to own the goods or be the party that re-imports them. Another business can re-import the goods with your permission, provided you hold the OPR authorisation. This flexibility is useful for triangular trade arrangements where goods move between multiple parties across different jurisdictions.
OPR is particularly valuable for UK businesses that need specialist repair or finishing services not available domestically, or for manufacturers who outsource specific production stages to lower-cost jurisdictions while retaining design and final assembly in the UK.
Who Cannot Use OPR
Certain businesses are explicitly excluded from using Outward Processing Relief:
- Freight forwarders acting in their capacity as forwarders
- Express courier operators
- Customs agents acting solely as agents
To qualify, you must be established in the UK, demonstrate financial solvency, maintain good customs compliance history, and keep appropriate records of all movements. HMRC will verify these criteria during the authorisation process.
Excluded Goods and Operations
OPR cannot be used in the following circumstances:
- Where the export results in a repayment or remission of duty that would not otherwise be due
- For goods previously placed under an end-use procedure at a reduced duty rate but not yet put to their authorised use (except for repairs)
- Where goods qualify for export refunds under agricultural support schemes
- Where a financial advantage is obtained under UK Agricultural Policy that would be distorted by the relief
These exclusions prevent OPR from being used to claim double relief or to manipulate agricultural support mechanisms. If your goods fall into any of these categories, you must pay full duty on re-import without relief.
Authorisation by Declaration for OPR
AbD is available for Outward Processing but only for repairs — not for processing operations. You can use AbD up to 10 times per rolling 12-month period with a maximum value of £500,000 per consignment.
Private individuals can use AbD for personal goods sent abroad for repair. For example, if you send a laptop to the manufacturer in another country for warranty repair, you can use AbD on re-import to avoid paying duty on the full value of the laptop.
No guarantee is required on the export side for OPR AbD, but you must be able to prove that the goods were exported for repair and that the re-imported goods are the same items (or replacement goods under the repair provisions).
Repair Cost Treatment
The duty treatment on re-import depends on whether the repair was charged:
If the repair is free of charge (e.g., under warranty), no Customs Duty is due on re-import. You still pay import VAT on the full value unless other reliefs apply.
If the repair is charged, duty is calculated on the repair cost plus the cost of return shipping and insurance, minus the statistical value of the goods when they were exported. This ensures you are not taxed on the value of the original UK goods, only on the value added abroad.
For replacement goods, where the original item is not returned but a replacement is sent, import VAT is due on the full value of the replacement plus any duty that would be due based on the repair cost treatment above.
Rate of Yield for OPR
As with IPR, you must specify a rate of yield for OPR operations. For repairs, this is typically 1:1 — one item exported, one item returned. For processing operations, you must calculate the expected ratio.
For example, if you export 500 yards of unfinished fabric to be dyed and finished abroad, then re-import 100 finished dresses, your rate of yield is 5:1. HMRC uses this to verify that the quantity of goods re-imported is consistent with what was exported.
Practical Example: UK Engineering Firm
A UK engineering company exports a specialised industrial pump to Germany for refurbishment. The pump was originally valued at £80,000 when manufactured. The repair cost is £15,000, and return shipping and insurance cost £500.
Without OPR, the company would pay duty on the full £80,000 value of the pump on re-import. With OPR authorisation, duty is calculated only on the £15,500 of overseas costs (repair + shipping). At a 4% duty rate for industrial pumps, this reduces the duty bill from £3,200 to £620 — a saving of £2,580.
Import VAT at 20% is still due on the full value of the goods including the UK-origin content, but the duty saving alone makes OPR worthwhile for high-value items requiring overseas specialist work.
Choosing Between IPR and OPR
The decision between Inward and Outward Processing depends on where your value-added operations are located and where your customers are based:
Use IPR when:
- You import raw materials or components from outside the UK
- Processing or manufacturing takes place in the UK
- Finished goods are exported outside the UK
- You want to avoid paying duty on inputs that never enter UK free circulation
Use OPR when:
- You manufacture or own goods in the UK
- Specialist processing or repair must be done outside the UK
- Processed goods are re-imported to the UK for sale or further processing
- You want to pay duty only on the overseas processing cost, not the full goods value
Some businesses use both reliefs in sequence. For example, a UK electronics manufacturer might use IPR to import components duty-free, assemble products in the UK, then use OPR to send finished units to Asia for software loading or final testing before re-importing them for UK sale.
Key Takeaways
- Inward Processing Relief suspends duty on imports for processing, then re-export — ideal for UK manufacturers using imported materials.
- Outward Processing Relief reduces duty on goods exported for repair or processing, then re-imported — valuable for specialist overseas work.
- Full authorisation takes at least one month to obtain and lasts 3-5 years depending on whether goods are classified as sensitive.
- Authorisation by Declaration offers a simplified border route up to 10 times per year with a max £500,000 per consignment and a refundable guarantee.
- Rate of yield must be declared for each operation — HMRC uses this to detect potential duty evasion.
- Economic conditions examination can lead to authorisation cancellation if UK producers are disadvantaged — compliance risk persists even after approval.
- Production accessories relief covers catalysts and protective materials but excludes fuels and energy sources except for testing/manufacturing.
- OPR cannot be used by freight forwarders, express operators, or customs agents acting in those capacities.
- Repair cost treatment under OPR distinguishes between free repairs (no duty) and charged repairs (duty on repair cost plus shipping).
Frequently Asked Questions
What is the difference between Inward Processing and customs warehousing? Inward Processing is for goods that will be processed, repaired, or transformed then re-exported. Customs warehousing is for goods stored without processing. If you intend to modify the goods, you need IPR, not warehousing. Warehousing does not allow processing operations beyond preservation and basic handling.
Can I use Inward Processing if I plan to sell some goods in the UK? Yes. You can release processed goods to free circulation and pay duty at that point. You may choose to be assessed on the value of the imported materials or the value of the processed goods — whichever is more favourable. HMRC may dictate the basis if your choice would significantly affect UK producers.
How long does it take to get IPR authorisation? HMRC aims to process full authorisation applications within one month. You must apply at least 30 days before your first intended import. For sensitive goods, the process may take longer due to the economic conditions examination. Retrospective authorisation can be backdated up to 12 months but requires exceptional circumstances.
What happens if I exceed the Authorisation by Declaration limits? If you exceed 10 uses per rolling year or the £500,000 per consignment limit, you must apply for full authorisation before your next import. Continued use of AbD beyond the limits without full authorisation is a compliance breach and may result in duty demands and penalties.
Can I transfer my IPR authorisation to another business? No. Authorisations are specific to the business that applied and cannot be transferred. If your business is sold or restructured, the new entity must apply for its own authorisation. However, you can authorise another party to act on your behalf under your existing authorisation with HMRC approval.
Do I need separate authorisations for GB and Northern Ireland? Yes, unless you apply for the multi-state authorisation covering both GB and Northern Ireland (and potentially EU sites). GB and NI have separate customs territories post-Windsor Framework, so authorisations are jurisdiction-specific unless you request the cross-border variant via admin.uum.cdms@hmrc.gov.uk.