You can use Inward Processing (IP) to get relief from Customs Duty and import VAT on goods that are imported from outside the EU to be processed, and then exported outside the EU, or released for free circulation in the EU.
Excise Duty is also suspended when goods are entered into IP.
If your business is based in an EU country you can use IP, subject to authorisation by HMRC. Non-EU bodies can only use IP for non-commercial imports.
You will have to pay duties once the goods have been processed if they're released into free circulation. The duties you'll pay can be based on the value of the goods at import, or the value of the final product - see Articles 85 and 86(3) of the Union Customs Code.
Conditions apply to using IP. You cannot issue any documents showing the status of the goods as T2 or free circulation, or any preference certificates unless specifically allowed under preference rules.
You also need to send a Bill of Discharge to your supervising office within 30 days of the end of your agreed processing period.
This guide explains Inward Processing authorisation, the equivalence procedure and how to export and dispose of inward processing goods.