Import and export is tricky business. Ask 12 people for advice and you'll get 12 ways of going about it (some more legal than others). However, read the rules of the HMRC and you risk headaches, permanently crossed eyes, and nosebleeds.
My opinion (not an expert): just make sure your creativity is above board and can be documented.
From what I understand (again, not an expert), repairs qualify for Outward Processing Relief (OPR) - no duty due on re-entering as duty has already been paid on the item when it originally entered the EC. However, you will need to pay import VAT on the repair charge (parts and labor),on shipping, and duty. To qualify for OPR, you may need to fill out Form C 1055 (Information Document to Facilitate the Temporary Exportation of Goods Sent From One Country For Manufacture, Processing, or Repair in Another). Some medical equipment is classified duty free so the OPR forms do not need to be filled out for these items. The ATA Carnet mentioned previously in the thread allows equipment to be used temporarily in another country free of duty.
Here is what the HMRC site says regarding Duty and VAT repairs
OPR is a customs procedure that relieves re-imported goods only from customs duty. You may be able to pay VAT on a reduced value for goods that you have previously exported if you can satisfy the conditions for this. If the exported goods are normally free of duty, you do not need to use the OPR arrangements, but you may still be able to claim relief from VAT by using CPCs 22 00 00 on export and 40 00 65 on re-import (see section 17).
Providing ownership of the goods was not transferred to any other person when they were exported, or during the time they were outside EC territory VAT is due on the following value at the time of re-importation to the UK:
1) the price charged to you for the process, repair or services including any charge made for parts and materials plus
2) any freight and other charges, except insurance, you have to pay for the transport of the goods to and from the processor's premises plus
3) any customs or excise duty or other import charges payable in the UK.
If the process has been carried out free of charge, for example because the goods are covered by a warranty, guarantee or service agreement, no VAT is due on re-importation. If the repair was carried out under a service contract agreement see paragraph 2.7.
All replacements are regarded as importations of new goods and are chargeable with VAT in accordance with the normal valuation rules. This applies whether or not any duty relief can be claimed.
You can find full guidance in Notice 702 Imports about paying VAT on a reduced value for goods imported after process or repair.
If your vision has not blurred you can find more information on the HMRC website --->
http://tinyurl.com/4tphff.Our company, based in California, has recently begun to receive repairs from the UK. After seeking advice from those more versed in VAT and Duty, we now advise our customers to value their broken equipment at 5GBP (it is technically worthless as it is broken). When we ship back we value the item at the repair cost. In this way, VAT can only be charged on the cost of the repair and shipping. Oh yeah, and duty if any. Got to love tax on tax.