Inward processing duty when selling in Britain
When inward processing goods enter free circulation, duty is payable. The calculation can use the imported inputs or the finished product, subject to HMRC’s authorisation conditions. Changing the agreed basis needs approval from your supervising office. Discuss supplier documentation with Cambridge China Bridge.
Start with the authorised calculation basis
For Chinese materials processed in Britain and released to free circulation, check which calculation basis your authorisation covers. HMRC asks you to state your intended basis when applying. For the wider sourcing decision, see our inward processing guide.
Compare inputs with the finished product
The input basis uses the commodity code, origin and value of the goods at import. The finished-product basis uses those of the final product after processing. Ask your customs agent to compare the resulting duty amounts, rather than just the tariff rates. For the underlying valuation work, see what goes into customs value.
The choice has restrictions
HMRC says the choice is usually yours, but it can specify the method depending on the imported goods, the intended process and the economic impact on the UK. Economic examination can also depend on the calculation method and whether UK producers would be disadvantaged. Ask your agent to confirm which options are available before budgeting for a saving.
Changing the method needs a decision
If your sales plan changes, contact your supervising office and explain why you want to change the method. It can allow or refuse the request and tell you whether your authorisation is affected. Keep that decision with the calculation instructions you give your customs agent.
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Prepare a file your agent can use
Put the Chinese supplier invoices, material specifications, input quantities and finished-product descriptions together. Ask your processor to explain how inputs map to the goods intended for British sale. Ask your customs agent to document the applicable basis, valuation assumptions and resulting duty. Use our commodity code guide when checking the descriptions used for each calculation.
Frequently asked questions
Is inward processing duty-free for British sales?
Releasing goods to free circulation means duty is payable. Check the authorised calculation basis before treating the suspended duty as a saving.
Is duty based on Chinese inputs or finished goods?
It can be based on the goods at import or the final product after processing. Check your authorisation and any method HMRC has specified.
Can I choose whichever duty calculation is cheaper?
HMRC says the choice is usually yours, but it can require a particular method. Compare amounts only after confirming which options your authorisation permits.
Can I change my inward processing duty method?
Contact your supervising office with your reasons. It will allow or refuse the request and explain any effect on your authorisation.