Find out when Onward Supply Relief and Inward Processing Relief can be claimed for VAT purposes.
If you import goods from outside the EU, you normally have to pay VAT as if you had bought them in the UK. In some circumstances you may be able to obtain relief from import VAT by claiming Onward Supply Relief (OSR).
OSR lets you import goods from outside the EU specifically to forward them on to another EU country without paying UK VAT on them. Instead, the VAT is accounted for in the destination country.
If you import goods from outside the EU specifically to process them in some way before re-exporting them outside the EU, you may be able to claim Inward Processing Relief (IPR).
You must inform HM Revenue and Customs (HMRC) about any goods or service that you import, and pay any VAT or other duties that are due.
But if you import goods to forward them on to another EU country, you can claim VAT relief on them. The VAT is then accounted for in the country of destination. This is known as OSR.
OSR involves putting the goods into free circulation in the UK. This is done by paying any applicable Customs Duty in the UK, and using OSR to claim relief from the immediate payment of import VAT. VAT is then accounted for by the recipient of the goods in the final destination country.
You can use OSR if you:
- are VAT registered in the UK
- regularly import goods
- are an agent registered for VAT in the UK and you have been appointed to act on behalf of an importer based in another country, who isn’t registered for VAT in the UK
- are a freight-forwarding agent making a zero-rated supply of the imported goods to someone who is registered for VAT, and who will account for the tax in another EU country
External community transit procedure
If you use OSR, Customs Duty is payable in the UK, and VAT is accounted for in the country of destination. If you use T1, both duty and VAT are payable in the final destination country.
Conditions for claiming OSR
To claim OSR you must be a trader registered for VAT in the UK, who is making a zero-rated supply of goods to someone registered for VAT in another EU country.
The goods you despatch to another EU country must be exactly the same as the goods you imported. You can’t process or modify them in any way.
You must send the goods to another EU country within 1 month of the date you imported them, ie the date when the goods entered free circulation. If you can’t meet this deadline you can apply for an extension to the National Import Reliefs Unit (NIRU):
The National Import Reliefs Unit
52-58 Great Victoria Street
Telephone 03000 513310 (Monday to Friday, 9am to 5pm)
- include the goods on your EU sales lists
- record the EU trade figures on your VAT Returns
How to claim OSR
To claim OSR, complete box 44 of form C88, the import SAD (Single Administrative Document) with these details:
- the expected place and date of onward consignment
- if known, the identity of the onward transport, ship, aircraft or vehicle
- the name, address and VAT registration number of whoever you’re sending the goods to
You must also enter the Customs Procedure Code (CPC) in box 37 of the import SAD to declare that you:
- meet the conditions for OSR
- will produce commercial evidence that the goods have been supplied to another EU country if HMRC ask for it
- will pay on demand any import charges due if the conditions for OSR aren’t met
OSR can be claimed for:
- direct imports from third countries - the main use for the relief - using CPC 42 00 00
- returned goods using CPC 61 23 04
- imports from third territories, eg the Channel Islands, for free circulation using CPC 49 00 70
OSR may also be claimed by UK VAT-registered traders removing their goods from:
- inward processing (suspension) arrangements using CPC 42 51 00
- temporary importation arrangements using CPC 42 53 00
- free zones using CPC 42 78 00
- customs warehousing using CPC 42 71 00
Accounting for OSR in your records
To account for the goods in your records, you must raise a tax invoice to whoever you’re supplying the goods to. This transaction must be recorded on your EC Sales Lists.
A summary of transactions must be recorded as EU trade figures on your VAT Return. If required to do so, you must also complete Intrastat Supplementary Declarations.
Inward Processing Relief
Under IPR you can get relief from duty on goods that are imported from outside the EU, processed in the EU and then re-exported. You can only get IPR if the trade doesn’t harm those who produce similar goods in the EU. Processing can mean anything from repacking or sorting to the most complicated manufacturing.
You don’t have to pay import VAT under IPR. It only becomes due if the imported goods are diverted to free circulation in the EU. If this happens, import VAT is based on the value of the goods being diverted, including import duty, when they first entered the EU for processing. The rate used will be the rate that applies in the member state where the goods are going, on the date that the diversion takes place.
You don’t have to be registered for VAT, but you do have to be authorised if you want to import or receive goods under IPR. Authorisations are issued to whoever processes the goods, or arranges for them to be processed on their behalf. If you sub-contract processing, the sub-contractor must hold their own authorisation, or be named on your authorisation.