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HMRC internal manual

Guidance on the Audit of Customs Values

Assists: practical application

Where the research and development work is carried out within the EU and is being provided (directly or indirectly) by the buyer of the imported goods free of charge or at a reduced cost, the value of such work is not dutiable.

Where the work is carried out elsewhere than within the EU, the value of the development work necessary for the production of the imported goods is dutiable. It may be necessary to separate the value of the research from the value of the development.

This is to be done by applying generally accepted accounting principles. The value of the development work applies to the cost of developing the product itself rather than only the manufacturing process.

Thus it is to be based on the total cost of the design centre (apportioned as appropriate to the imported goods) and not only the cost of preparing documents (drawings and/or specifications).