If you hold an Inward Processing authorisation, you must send HMRC a Bill of Discharge on form BOD3 within 30 days of the end of your period of discharge.
Miss that deadline and the consequence is not a fine. It is that the duty and import VAT you suspended become payable — the entire saving the authorisation existed to deliver, reversed by a missed administrative deadline.
That asymmetry is what makes Inward Processing unusual. The relief is generous, the paperwork is unforgiving, and the two are not proportionate to each other.
What Inward Processing actually does
Inward Processing lets you suspend customs duty and import VAT on goods imported for processing, repair or modification, where those goods will subsequently be re-exported — or released to free circulation with duty calculated on a more favourable basis.
The key word is suspend. The duty does not disappear. It sits in abeyance, conditional on you meeting the terms of your authorisation and proving it. The Bill of Discharge is that proof.
Until the BoD is accepted, the suspended liability is still yours.
What a Bill of Discharge has to contain
The BOD3 is not a tick-box form. Per entry, expect to provide:
- Your details — name, address, telephone, email and EORI number
- The import entry number and date of import
- A description of the goods
- The rate of yield — how much finished product came from the imported goods
- The method of disposal — re-export, free circulation, transfer, destruction
- The declaration number that discharged the procedure
- The valuation method used
- The percentage of the imported goods in the finished product
Two of those cause most of the trouble.
Rate of yield is the relationship between what went in and what came out. It has to be supportable, and if your actual yield differs materially from the rate in your authorisation, that is a conversation to have with your supervising office rather than a number to quietly adjust.
Percentage of imported goods in the finished product requires you to have tracked the specific imported goods through your production process. If your factory floor treats stock as fungible and your systems do not distinguish IP goods from duty-paid stock, this is where reconstruction becomes painful.
The deadline, precisely
30 days after the end of your period of discharge. Send it to your supervising office.
Two things worth being clear about:
Your discharge period is set in your authorisation. It is not a universal figure, and it is not something to take from an article — including this one. Read your authorisation, note the period, and work backwards from it. Businesses with several authorisations may have several different periods running at once.
The clock runs from the end of the period, not from when you finished processing. Goods re-exported in month one of a period do not start their own clock. The deadline attaches to the period.
What goes wrong in practice
Nobody owns the deadline. Inward Processing sits across customs, operations and finance. The customs team knows the rule, the production team holds the yield data, and the deadline belongs to whoever noticed it last. Missed BoDs are usually an ownership failure, not a knowledge failure.
The evidence is assembled retrospectively. If nothing recorded which imported consignment fed which production run at the time, somebody is reconstructing it months later from delivery notes and memory. That is slow, and it is not persuasive.
The authorisation conditions drift. Authorisations carry conditions — where processing happens, what processing is permitted, which goods are covered. Businesses change suppliers, add product lines and move sites without revisiting whether the authorisation still covers what they do.
Discharge method is not tracked. Some goods are re-exported, some go to free circulation, some are scrapped. Each is a different discharge with a different treatment, and the BoD has to state which.
Nobody reconciles the numbers. Imported quantity in, finished product out, waste accounted for. If those do not reconcile, HMRC will ask why — and “we think some was scrapped” is not an answer.
If you have missed one
Do not leave it. The exposure is the full suspended duty and VAT on the entries in that period, which for an active IP authorisation is rarely a small number.
Contact your supervising office. Late is better than absent, and engaging before HMRC chases is treated differently from being chased.
Establish the true position first. Work out what was actually discharged and how, before you open the conversation. A late BoD that is complete and accurate is a very different proposition from a late BoD that raises more questions than it answers.
Consider whether this is a disclosure. If the underlying position is that duty became payable and was not paid, that may need voluntary disclosure rather than just a late form — and an unprompted disclosure is treated considerably more favourably than one prompted by HMRC noticing.
Take advice if the sums are significant. IP exposures compound across a period, and the technical arguments about discharge and yield are worth having properly.
Why IP is worth the trouble anyway
None of the above is an argument against Inward Processing. For businesses importing to process and re-export, the cash-flow and duty savings are substantial and entirely legitimate. Plenty of UK manufacturers would not be competitive without it.
The point is narrower: IP is a relief with an administrative condition attached, and the condition is not optional. The businesses that get into difficulty are almost never the ones misusing the relief — they are the ones using it properly and failing to evidence it on time.
Making the deadline a non-event
The practical fix is unglamorous: know what is under the procedure, know when each period ends, and hold the discharge evidence as you go rather than assembling it at the end.
That means being able to answer, at any point:
- What goods are currently under IP, from which entries, in what quantities?
- Which period does each belong to, and when does that period end?
- What has been discharged so far, by which method, against which declaration?
- Does the yield reconcile?
Most businesses answer those from a spreadsheet that one person maintains, which works until that person is on holiday when a period ends.
The HC Customs compliance portal tracks IP and OP inventory against your CDS declarations, holds discharge evidence per entry, and manages Bill of Discharge periods so the deadline arrives with the return already assembled rather than as a scramble. It also flags entries approaching the end of their period while there is still time to act on them.
30-day free trial, no card required.
Frequently asked questions
What is a Bill of Discharge?
The return you send HMRC to account for goods entered to Inward Processing — what was imported, what happened to it, and how the procedure was discharged. It is submitted on form BOD3 to your supervising office.
When is a Bill of Discharge due?
Within 30 days of the end of your period of discharge. The period itself is set in your authorisation, so check yours rather than assuming a standard length.
What happens if I miss the Bill of Discharge deadline?
The suspended customs duty and import VAT may become payable. That is the whole relief reversed, so the exposure is usually far larger than any penalty would be.
What is rate of yield?
The relationship between the quantity of imported goods entered to the procedure and the quantity of finished product obtained. It appears in your authorisation and must be supportable by your actual production records.
Is there a different form for End Use?
Yes. End Use — authorised use — is discharged on BOD4 rather than BOD3. They are different procedures with different requirements.
Can my customs agent submit the Bill of Discharge for me?
An agent can prepare and submit it, but the authorisation is yours and the underlying obligation and evidence remain yours. The same principle as representation applies.
How long do I need to keep Inward Processing records?
Longer than a straightforward import. Special procedures carry their own conditions, the obligation generally continues while goods remain under the procedure, and retention runs from discharge — see our record-keeping guide and the terms of your own authorisation.