Apply for inward processing authorisation

Inward processing (IP) suspends import duty and import VAT on goods you bring in to process, repair, or alter. This guide walks through scoping the operation, securing a guarantee, applying via form SP1, and discharging the goods to either re-export or duty-paid release.

UK-wide
Guide summary

Apply for inward processing authorisation to delay paying import duty and VAT on goods you bring in to process, repair, or alter. You must submit form SP1 or use a customs declaration code, provide a financial guarantee, and keep records of what happens to each import.

  • Submit form SP1 for full authorisation or use a customs declaration code for one-off processing
  • Provide a Customs Comprehensive Guarantee unless you have an AEOC waiver
  • Keep records linking imports to final goods and their discharge route
  • File a Bill of Discharge within 30 days after processing ends
  • Re-export processed goods or pay duty if released in the UK
  • Standard processing time limit is 6 months (extensions available)
  • Authorisation lasts 5 years for standard goods, 3 years for sensitive goods
  • Late Bill of Discharge triggers full duty plus penalties
  • Check if your operation meets the economic condition automatically
  • Define processing details like input goods, activity, and rate of yield
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Inward processing (IP) lets you import goods into the UK without paying customs duty or import VAT at the border, provided you process them and then either re-export the processed goods or release them to free circulation with duty paid on the original raw materials. It is the procedure to use when you import to repair, refurbish, manufacture, or alter — and the resulting goods will leave the UK again or only be sold here after value has been added.

You apply for IP authorisation in advance using form SP1, or — for one-off small-scale processing — you can authorise by declaration on the Customs Declaration Service (CDS) using a 51-series procedure code.

Before you apply

You must be established in the UK, keep records that let HMRC trace each import through to its discharge, and offer a financial guarantee for the suspended duty unless you hold Authorised Economic Operator (Customs) status with a guarantee waiver.

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    1. Define the processing operation

    Specify the input goods (commodity codes), the processed goods, the processing activity (repair, manufacture, alteration), the rate of yield (how many units of processed goods you get from a unit of input), and whether you intend to use equivalent goods (UK-origin or already-free-circulation goods of the same kind) in place of imports. HMRC needs all of these to authorise the operation and to reconcile your bill of discharge later.

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    2. Confirm the economic condition is met

    Under SI 2018/1249 most processing operations are deemed to satisfy the economic condition automatically — meaning HMRC accepts that authorising IP will not harm UK or EU producers of similar goods. Sensitive goods (listed in the Regulations) require an explicit economic test by HMRC. Check the SI 2018/1249 schedule and HMRC Notice 3001 before you apply.

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    3. Provide a Customs Comprehensive Guarantee (CCG)

    You must cover the suspended import duty (and import VAT, where applicable) with a CCG. AEOC holders can apply for a guarantee waiver. Apply for a CCG before submitting SP1 — HMRC will not authorise IP without one in place or pending.

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    4. Submit form SP1 to HMRC

    Apply via form SP1 for full authorisation if you process regularly. For one-off or small-scale operations, you can authorise by declaration on CDS using a 51-series customs procedure code (CPC) — no SP1 needed, but the operation is limited and the goods must be discharged within a shorter throughput period. Full authorisation typically takes up to 30 days.

  5. 5

    5. Track each consignment through to discharge

    Maintain records that link every import declaration to its processed output and to the discharge route — re-export (with proof of export), release to free circulation with duty paid on the raw materials, transfer to another special procedure (e.g. customs warehousing or outward processing), or destruction under customs supervision. Apply your authorised rate of yield consistently.

  6. 6

    6. File the bill of discharge

    Submit the bill of discharge to HMRC within 30 days of the end of the throughput period stated in your authorisation. The bill reconciles every kilogram or unit imported against its discharge route. Late or missing bills of discharge trigger a customs debt for the full suspended duty plus a Schedule 1 penalty.

Three common ways IP authorisation goes wrong

Untracked rate of yield. If you cannot show HMRC how many units of processed goods came from a given quantity of imports — including waste, scrap, and by-products — HMRC cannot reconcile your bill of discharge. The result is a customs debt on the unreconciled portion.

Late or missing bill of discharge. The 30-day window after the throughput period is strict. Missing it crystallises the suspended duty as a customs debt and exposes you to a Schedule 1 penalty under the Taxation (Cross-border Trade) Act 2018.

Undisclosed processing change. If you process the goods differently from the operation authorised on SP1 — different end product, different equivalent goods, different site — the authorisation no longer covers the imports. Apply to vary the authorisation before you change anything material.

Penalty risk

Failure to discharge inward processing

Penalty:
<p>If goods authorised under inward processing are not discharged within the throughput period — by re-export, duty-paid release, transfer, or destruction — a customs debt arises for the full suspended import duty and import VAT under regulation 9 of SI 2018/1249. HMRC will also assess a penalty under Schedule 1 of the Taxation (Cross-border Trade) Act 2018, with daily penalties for continuing failure. Interest accrues from the date of the original import.</p>

Combining inward processing with customs warehousing

If you want to hold imported goods duty-suspended before deciding whether to process or re-export, place them into customs warehousing first and then transfer them into inward processing when you start the operation. The two procedures combine cleanly — you avoid placing goods under IP throughput pressure before you actually need to process them, and you can split a consignment between processing and onward sale or destruction.

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Authoritative guidance and legislation

What to do next

If your operation is one-off or small-scale, prepare a CDS declaration with a 51-series procedure code and the supporting commercial records. If you process regularly, gather your rate of yield calculations, your CCG reference, and the commodity codes for inputs and outputs, then submit form SP1. Diary the throughput period and the bill-of-discharge deadline as soon as authorisation is granted.