Written by Marika Majewska, Customs Specialist at ChamberCustoms
A look into customs warehousing, inward and outward processing, and best practices for UK businesses
In this blog, we will walk you through the key points covered in our recent webinar, from the basics of special procedures to practical compliance insights that UK businesses need to be aware of.
You can also watch the full webinar recording below:
Special Procedures: The Basics
Special procedures are designed to help businesses minimise their tax burden, improve cash flow, and maintain compliance. Every time you import something to the UK, you must notify HMRC and, in most cases, pay VAT and duty. However, special procedures such as inward and outward processing, temporary admission, and customs warehousing can offer significant advantages, especially if you’re regularly importing components to create finished products or exporting goods after processing.
In essence, if goods are not being released for free circulation in the UK, there may be opportunities to suspend or avoid paying duty - and it’s all about being authorised and following the right processes. Strong documentation also underpins the effective use of these procedures.
Compliance Expectations: Record-Keeping, Evidence and Responsibilities
HMRC places significant emphasis on clear evidence and robust record-keeping across all special procedures. Businesses must be able to demonstrate how goods were imported, processed, stored, moved, and discharged from the procedure, and HMRC may request documentation at any time. Maintaining a complete audit trail is essential.
Correct valuation is equally important. Where goods are repaired or processed - particularly under outward or inward processing - the duty calculation depends on accurate commercial documentation that clearly evidences costs, processing activity, and any value added.
Businesses often encounter common pitfalls such as incorrect or missing procedure codes, failing to discharge a procedure on time, mismatches between commercial invoices and customs declarations, or insufficient evidence that goods were re-exported or processed correctly. Another frequent assumption is that a customs agent is responsible for compliance; however, HMRC holds the business itself accountable.
It is therefore vital that staff understand the procedure being used, the documentation required, and their responsibilities in maintaining compliance.
Inward Processing: Bringing Goods in for Repair or Modification
Inward processing allows you to import goods into the UK to be processed or repaired, and then re-export them without paying duty and VAT. The duty is suspended at import, and you must demonstrate to HMRC that these goods won’t enter free circulation. For businesses that repeatedly use this process, authorisation is essential.
A recent example involved a client reconditioning rail parts sent from overseas, repaired in the UK, and returned abroad. Even where some parts are duty-free, VAT and full procedure compliance remain critical.
Remember, correct documentation and procedure codes, and a clear audit trail are vital - otherwise, it may seem that goods never left the UK, and you could end up paying the suspended duty and VAT charges. Compliance is key!
Outward Processing: Exporting for Repair Abroad
Outward processing is the reverse - you export goods to be repaired or modified abroad and then bring them back. Duty is only payable on the added value (the cost of repair or modification), not the original value of your goods. For repairs under warranty, there’s typically no added value, meaning no additional duty.
Customs Warehousing: The “Freezer” for Your Goods
Think of a customs warehouse as an extension of the border at your premises - a “freezer” where goods are held in duty and VAT suspension. You only pay duty and VAT when goods leave the warehouse for free circulation. If the goods are re-exported, you don’t pay duty at all. While you cannot process goods in the warehouse (beyond minimal handling), customs warehousing is a powerful tool for bulk buyers and those managing inventory for seasonal or fluctuating demand.
There are three types of warehouses:
Public warehouses (used by multiple businesses)
Private warehouses (for storing your own goods)
Excise warehouses (for alcohol, tobacco, and oils, operating under a separate regime).
Preserving Origin and Preferential Agreements
Goods in a customs warehouse retain their original preferential status. For instance, European goods imported into the UK and held in a customs warehouse can be re-exported and still benefit from preferential agreements. It’s an important advantage, especially post-Brexit, when direct transport rules and origin preservation can be more challenging.
Third-Party Logistics and Warehousing: What’s the Difference?
Third-party logistics (3PL) providers may or may not offer customs warehousing. If they do, duty suspension applies; if not, it doesn’t. Bonded warehouse is common industry jargon for a customs warehouse - the official term is customs warehousing, which requires a formal authorisation and, in some cases, a financial guarantee.
Application Process: Tips for Success
Applying for special procedures is straightforward if you’re prepared. HMRC will review your written procedures and audit your processes. The key to approval is integrating the procedure into your existing workflow and ensuring your teams understand and take ownership of the compliance responsibilities. Don’t rush the application - be fully ready for audit before you submit.
Evaluate implementation and ongoing running costs
Ensure you have the necessary expertise or seek support
Evidence of the economic need for the procedure
Manage internal change and foster a strong compliance culture
Work closely with transport partners and customs agents
Costs and Authorisation: What to Expect
HMRC doesn’t charge for authorising special procedures, but you must prove an economic need. Internal costs – such as management time, compliance, and any consultancy support - should be factored in. Operating special procedures means ongoing compliance and reporting, so be prepared to invest in processes that work effectively for your business and can be maintained consistently.
Best Practice: Combining Procedures for Maximum Benefit
Special procedures can be combined and tailored to suit complex business needs - goods can move from warehouse to inward processing and back again. The key is to plan and document each step, ensuring compliance at every stage and maximising the benefits available.
Next Steps
If you would like to explore whether special procedures could support your business, please get in touch to book a free 30-minute discovery call.