What is a bill of discharge?

The return that accounts for goods under inward processing: what was processed, re-exported or released into the market. In the UK it goes to the supervising office no later than 30 days after the end of the discharge period.

Does inward processing cover import VAT?

Yes. In the EU the goods are not subject to import duty or other import taxes such as VAT; in the UK, inward processing suspends both customs duty and import VAT.

What is the difference between inward processing and duty drawback?

Inward processing suspends duty when goods arrive; drawback refunds duty already paid once goods leave. The EU abolished its old drawback system for processing, while the US refunds 99% through drawback.

Term

Inward processing

Inward processing is an EU and UK customs procedure that lets a business import goods, process or repair them, and re-export the result without paying import duty or import VAT on the imported goods. It needs an authorisation, and the holder accounts for the goods in a bill of discharge, paying duty only on what stays in the market.

Also called IP, inward processing relief, IPR, inward processing procedureApplies in EU, UKUpdated 13 October 2026

How it works

Under Article 256 of the Union Customs Code, non-Union goods may be used in one or more processing operations without being subject to import duty. The European Commission adds that they are not subject to other import taxes such as VAT, or to commercial policy measures, and customs set the period within which the procedure must be discharged. In the UK, inward processing lets traders suspend customs duty and import VAT on goods imported from outside the UK; the authorisation holder is responsible for any duty that becomes due.

UK limits

Route	Limits
Authorisation by declaration	10 uses in a rolling year; each consignment up to £500,000; 100% security deposit for the duty and VAT suspended; 6 months to discharge
Full authorisation	Granted for up to 5 years
Bill of discharge	Due no later than 30 days after the end of the discharge period

HMRC's inward processing guidance

Worked example: fabric made into shirts

£400,000 of cotton fabric · UK duty 8% = £32,000 · import VAT 20% on £432,000 = £86,400 · £118,400 suspended → shirts re-exported → £0 due

8% is the UK tariff's third-country rate for commodity code 5208121600. Under authorisation by declaration the £118,400 is held as a security deposit until the goods are discharged; any shirts sold in the UK pay duty and VAT then.

The mistake people make

Skipping the bill of discharge in a quiet period. HMRC says a bill of discharge is still required even if no goods were imported or discharged in the period, and that the customs debt is incurred on the first day after the deadline to submit it — on everything still under the procedure.

FAQ