Outward processing lets a UK business send goods abroad to be repaired or processed and bring them back without paying Customs Duty and import VAT on their full value. A free repair under guarantee can return duty free, and for a charged repair or other processing in Great Britain the value of the returning goods is reduced by the value of the original goods that went out, so duty falls only on the difference.

What is outward processing?

Normally, goods arriving in the UK are chargeable on their full value even if they started life in the UK. Outward processing, often called outward processing relief or OPR, is the procedure that changes this. Section 36 of TCTA 2018, the main UK customs statute, covers goods declared on export for an outward processing procedure, processed outside the UK during a temporary period set by HMRC notice, and then imported back.

Processing is broadly defined. HMRC’s Customs Technical Handbook includes erecting, assembling, fitting or other working of the goods, repairing them, using them to help produce other goods, destroying them and testing them against set standards. Common uses include:

  • sending defective machinery back to an overseas manufacturer for repair;
  • sending fabric abroad to be made into garments; and
  • importing replacement goods under the standard exchange system while a defective item is repaired.

It is one of the customs special procedures, and is the mirror image of inward processing, which suspends duty on foreign goods processed in the UK.

How is the relief worked out?

Free repairs

Under section 36(6), goods repaired by anyone free of charge continue to be regarded as domestic goods, provided the terms of the procedure are not breached. HMRC’s guidance says no duty is payable on goods repaired or replaced free of charge under a guarantee if the correct procedure code was used, you can prove the goods were exported under outward processing, you can show the guarantee terms, and the guarantee cost was included in the customs value when the goods were first imported. A warranty or service contract that was not part of the original import value is dutiable.

Charged repairs and other processing in Great Britain

For anything else, the returning goods are chargeable, but section 36(7) reduces their value by so much as can be attributed to the goods as they stood before export. The Customs Technical Handbook sets out the steps:

  1. Work out the customs value of the imported processed products using the normal valuation methods.
  2. Deduct the value of the exported goods used to make them, applying the agreed rate of yield.
  3. Pay duty on the difference at the rate for the imported processed products.

The rate of yield shows how much product comes from the goods exported. HMRC’s example is 500 yards of material exported to make 100 dresses. For a repair it is always one to one. Form C&E1154 is used to send HMRC the relief calculation.

Northern Ireland follows the Union Customs Code, where duty on processed goods is charged on the added value, meaning processing costs and transport back, so the method differs.

Import VAT

For repairs, HMRC’s guidance says VAT is charged on the repair costs plus outward and inward freight and duty, excluding insurance. Replacement goods usually bear VAT on their full value. On the re import declaration VAT registered businesses can choose postponed VAT accounting.

Is there full relief under trade agreements?

Yes, in some cases. Regulation 31A of the Customs (Special Procedures and Outward Processing) (EU Exit) Regulations 2018 gives full relief from import duty where goods are repaired for a charge, or altered, under outward processing in a country that has an arrangement with the UK under which no customs duty applies to those goods. HMRC’s guidance links this to the conditions of each free trade agreement, including the UK and EU Trade and Cooperation Agreement. Normal import VAT rules still apply.

Who can use it and how do you get authorised?

You can apply if you are established in the UK. You do not have to own the goods or be the person who re imports them. You must be financially solvent, not have a poor customs compliance history and be able to keep records. Freight forwarders, express operators and customs agents cannot apply. There are four routes:

  • Full authorisation, for regular users, applied for at least 30 days before exporting and granted for up to 5 years.
  • Authorisation by declaration, for repairs only, up to 10 times in a rolling year and for goods worth no more than £500,000. It is not available with simplified export declarations, equivalence, the standard exchange system, anti dumping goods or backdating. No security deposit is needed.
  • Retrospective authorisation, in exceptional circumstances, backdated up to 12 months, or 3 months for sensitive goods, and only if you have not had one in the last 3 years.
  • Combined Northern Ireland and EU authorisation, for operations across both.

Some authorisations are subject to an economic test, because the relief can cancel duty that protects UK producers.

When can the relief not be used?

Outward processing is not available where the export would trigger a repayment or remission of import duty, an export refund or another financial advantage under UK agricultural policy. It is also unavailable for goods released at an authorised use rate but not put to that use, except for repairs. If goods are exported for repair but come back unrepaired and unaltered, returned goods relief may apply instead, which generally requires re import within 3 years.

What does a worked example look like?

Illustration only. A UK manufacturer sends a machine worth £20,000 to its US maker for a charged repair. On return, the customs value of the repaired machine, including the repair and return transport, is £24,000. Under the Great Britain method, £20,000 is attributed to the machine as exported, so duty is charged on £4,000 at the rate for the machine. Without outward processing, duty would be charged on the full £24,000. Import VAT is worked out on the repair costs, freight and duty as described above.

What records and mistakes should you watch?

Records must identify the goods exported and returned, the declarations used, the nature of the processing, the rate of yield and any lost or damaged goods. Your outward processing authorisation number must appear on both the export and import declarations. Common mistakes include:

  • Exporting goods on a normal export declaration, such as one used for zero rated exports, rather than declaring them to outward processing, so there is no link to the return.
  • Not being able to show the returning goods are the ones that went out, without an equivalence authorisation.
  • Claiming free repair relief where the guarantee was not part of the original import value.
  • Using authorisation by declaration for processing rather than repair, or more than 10 times in a year.
  • Relying on a third party’s records. HMRC says the authorisation holder remains responsible for any customs debt caused by inaccurate records.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.