Temporary Admission, Customs Warehouse and Inward Processing Relief: what’s the difference?
In the second webinar of Martyn Fiddler Aviation’s UK Tax Week the team focus on special customs procedures, specifically Temporary Admission (TA), Customs Warehousing (CW), and Inward Processing Relief (IPR). These regimes offer alternatives to formal import and offer the benefit of being 0% VAT rated.
Each regime is used for a different purpose:
- Temporary Admission is known as a simplification procedure. It is a facility available for non-local residents that allows an aircraft to visit a territory on a temporary basis.
- Customs Warehousing is used specifically for storage, enabling an aircraft to be placed in storage in the UK without being liable to pay import VAT.
- Inward Processing Relief is used for planned repairs and maintenance within the UK.
Each regime is mutually exclusive so it is important to ensure the correct procedure is used for the purpose of entering a territory. It is then possible to move between them, from one procedure to another if necessary; there are limitations to doing so which differ between tax territories, but the UK is flexible.
How are special procedures different from an import?
The choice is binary, an aircraft is either imported into a customs territory because it needs to be, or it is not imported (but will still be under customs control) and therefore has to enter the territory under a certain customs regime.
Using Temporary Admission in the UK tax territory
Temporary Admission is a very simple, effective and free relief which allows you to simply arrive and enter into the UK with no additional paperwork and remain in the territory for a maximum period of 6 months. Specific eligibility conditions do have to be met so it is therefore advisable to seek professional advise in order to avoid running the risk of breaking TA rules. Failure to adhere to such conditions could mean having your aircraft forcibly imported by HMRC and facing harsh tax consequences. Not taking advice is simply a risk not worth taking!
Custom Warehousing and IPR Authorisation
Unlike TA which is for use over an entire territory, Customs Warehousing and IPR apply to a specific geographical area and work on the basis of an authorisation. This authorisation is agreed between the HMRC and the authorisation holder. The agreement will cover specific defined, approved areas, for example Customs Warehouse will generally cover specific customs warehouse areas, not an entire airport; IPR will cover specific facilities and again not an entire airport.
To bring an aircraft into the UK under Customs Warehousing you need an authorisation holder who can provide that service and guide you through the process, the paperwork, what needs to be done to enter the customs warehouse and then to discharge the aircraft from the regime. Usually discharge from customs warehouse would be done through export, import into the territory, or moving it to another special customs regime. An aircraft can in theory sit in a Customs Warehouse for any period of time agreed with the authorisation holder. How long an aircraft can stay under IPR will depend on the length of time it takes to complete the maintenance work required, although it is also possible to extend this for further works. Once this work is completed the aircraft will be then discharged.
Martyn Fiddler Aviation is the primary customs warehouse authorisation holder for aircraft and aircraft parts in the UK. For IPR it may well be that the desired MRO or repair facility to be used has an authorisation, however if they don’t, it is possible for another authorisation holder such as Martyn Fiddler Aviation to extend authorisation over the facility. This can take up to 10 days so it is important to know if this will be required in advance.
Can you complete an aircraft sale while its under Customs Warehousing?
A significant benefit to Brexit is that you are now able to complete an aircraft sale while under a customs warehousing regime. The aircraft will not be subject to UK VAT, nor will it face EU VAT charges given that the UK is now a separate tax territory. This also means that the seller and any intermediate sellers in a chain supply do not have to charge VAT, and moreover don’t have to register VAT in order to declare transactions. This applies equally to a series of back to back transactions providing the aircraft is in the Customs Warehouse for all of the sales. Another benefit to closing a transaction in the new UK tax territory is that you can close on the ground, which allows the aircraft to be supported by UK MRO’s and other support business as necessary. It also helps simplify the process of applying for a UK mortgage to already have the aircraft located in the UK.
The information included in this article is considered true and correct at the date of publication; changes to rules and regulation made after the time of publication may impact on the accuracy of the information referenced or inferred to in this article. The information in the article may change without notice and Martyn Fiddler Aviation is in no way liable for the accuracy of any information printed or stored or in any way interpreted and used by the user. This article or the information contained in it is not provided or intended to be used as advice of any form.
If you have any doubts or would like to discuss any aspect of this article, please do not hesitate to contact one of our experts who will be happy to discuss your individual circumstance.