Freight, haulage and logistics
Accountant for International Logistics and Freight Businesses
Import VAT you can recover and duty you never can, freight that is zero-rated in one direction and outside the scope in the other, and lorries written off on entirely different rules from cars.
We work with freight forwarders, hauliers, couriers and importers moving goods in and out of the UK. What separates this from ordinary business accounting is that a large part of the money crossing your accounts is not yours: import VAT, customs duty, disbursements paid on a customer’s behalf. Whether each of those is a cost, a recoverable tax or a pass-through changes the profit, the VAT return and the balance sheet.
The errors we are asked to correct are remarkably consistent. Import VAT reclaimed on the wrong document. Duty treated as recoverable when it never is. Freight invoiced with VAT that should not have been charged, or without VAT that should. Vehicles put through the wrong capital allowance. Each is straightforward to fix once, and expensive if it has run quietly for two years.
Import VAT recovered properly
Postponed accounting operated correctly, on the evidence HMRC actually asks for.
Duty treated as what it is
A cost that stays a cost — priced into the job rather than discovered at the year end.
Freight VAT in both directions
Place of supply and zero-rating applied per movement, not per customer.
Vehicles written off correctly
Lorries, trailers and vans are not cars, and the allowances are not the same.
Import VAT is recoverable — if you hold the right evidence
Postponed VAT accounting lets you declare import VAT and reclaim it on the same return, so no cash leaves the business at the border. It is the default choice for most importers and it removes a funding cost that used to be significant. The catch is evidential: the monthly postponed import VAT statement is what supports the entry, and it has to be downloaded from the customs system. Nobody sends it to you, and it is only available for a limited window.
If you pay import VAT at the border instead, the import VAT certificate issued to the importer is the evidence. Either way the document names the importer of record, and that is the only party entitled to reclaim.
The most common error we see is a business reclaiming import VAT from its freight forwarder’s invoice. That invoice is a request for money the forwarder laid out; it is not evidence that you were the importer or that the VAT relates to your goods. Claims built on it fail on inspection, and because the same error repeats every month the assessment covers years rather than a quarter.
Customs duty is a cost, and it stays one
Unlike VAT, customs duty is not recoverable. It forms part of the cost of the goods, and if it was not priced into the job it has come straight out of the margin. Whoever is named as importer of record owes it, which is why agreeing that role in the contract matters as much as agreeing the freight rate.
A duty deferment account lets a month of duty and import VAT settle in one direct debit rather than consignment by consignment, which smooths cash and speeds clearance, but it needs a guarantee or an approved waiver behind it. We work out whether the facility earns its cost at your volumes.
One boundary worth stating plainly: commodity classification and origin determine the duty rate, and those are customs questions rather than accounting ones. We will tell you what a rate does to your margin and make sure the figures land correctly in the accounts — and we will say when you need a customs specialist rather than guess at a classification.
Where your freight service is supplied
For services to another business the general rule puts the place of supply where the customer belongs. A UK business customer means UK VAT. An overseas business customer normally means the supply is outside the scope of UK VAT and the customer accounts for it under the reverse charge — so no VAT is charged, but the sale still has to be reported correctly rather than left out.
Separately, transport of goods that relates to an import into or an export from the UK can be zero-rated. That relief attaches to the movement, not to the customer, so the same client can generate zero-rated and standard-rated invoices in the same month. Deciding VAT per customer rather than per movement is what produces the mixed-up returns we are usually asked to unpick.
- Whether the customer is in business, and where they belong
- Whether the movement is linked to an import or an export
- How subcontracted carriage is treated when you buy it in
- What the invoice itself says, since that is what an inspection reads first
Vehicles: what you can write off, and how fast
Lorries, trailers, vans and forklifts are plant and machinery, not cars, and the difference is worth a great deal. A company buying new qualifying plant can claim full expensing, taking the whole cost against profit in the year of purchase; the annual investment allowance covers most other cases including second-hand. Cars are excluded from both and get writing down allowances at a rate set by their emissions, spreading relief over many years.
VAT follows a similar split. Input tax on a commercial vehicle used for the business is normally recoverable; on a car it usually is not, even where the business use is genuine.
How you acquire the vehicle changes the answer again. Hire purchase is treated as a purchase, so the allowances are available on the full cost from the start. A contract hire agreement is not a purchase, and relief comes through the rental deduction instead — sometimes restricted. Deciding this before signing is worth more than any adjustment made afterwards.
Drivers: allowances, and who is actually employed
Drivers spending the night away can be paid a subsistence allowance without tax, and there is an approved industry rate for drivers using a sleeper cab. It is not automatic: paying it free of tax requires an approval notice from HMRC and a system for checking that the expense was genuinely incurred. Paid without those, it is simply pay, and the assessment covers the tax and national insurance that should have been deducted. The rate is reviewed periodically, so it is worth confirming the current figure each year rather than carrying one forward.
Owner-drivers raise the status question instead. A driver operating through their own company, on your vehicle and to your schedule, is likely to be caught by the off-payroll rules where the end client is medium or large — and the party paying that company operates PAYE on the deemed payment. It is the same analysis recruitment agencies face, and it is decided on working practices rather than on contract wording alone.
Related pages you may find useful:
Invoicing in euros and dollars
If you invoice in a foreign currency the VAT still has to be reported in sterling, and the rate used has to be one HMRC accepts — its published monthly rate, or a market rate applied consistently rather than chosen invoice by invoice. Mixing methods to suit the movement is the kind of thing that turns a routine inspection into a longer one.
At the year end, balances still owed in a foreign currency are retranslated and the difference goes through the profit and loss account, which means a quiet month for sterling can move your reported profit without anything happening in the business. Where that swing is large enough to matter we will say so, and set out what forward cover would and would not fix — the hedging decision is commercial, but it should be taken with the accounting consequence understood.
Frequently asked
What is postponed VAT accounting, and should I use it?+
It lets you declare import VAT and recover it on the same VAT return, so nothing is paid at the border and no cash is tied up waiting for a refund. For most importers recovering VAT in full it is the obvious choice. The obligation it creates is evidential: you have to download the monthly postponed import VAT statement, because it is not sent to you and it does not stay available indefinitely.
Can I reclaim import VAT shown on my freight forwarder’s invoice?+
No. That invoice is the forwarder recharging what they paid out; it is not evidence that you were the importer of record or that the VAT relates to your goods. The claim has to be supported by the postponed import VAT statement or the import VAT certificate. This is one of the most common findings in a freight VAT inspection, and because it repeats monthly the assessment is rarely small.
Is customs duty reclaimable like VAT?+
No. Duty is a cost of importing the goods and there is no mechanism to recover it in the ordinary way, so it has to be priced into the job. Reliefs exist for specific situations — goods that are re-exported, or processed and sent back out — but they are arrangements you have to be authorised for in advance, not adjustments made afterwards.
Do I charge VAT on international freight?+
It depends on the movement, not only the customer. Transport of goods connected with an import into or an export from the UK can be zero-rated. Separately, services to an overseas business customer are generally outside the scope, with that customer accounting under the reverse charge. The same client can therefore produce both zero-rated and standard-rated invoices in one month.
Can I claim the full cost of a new lorry in one year?+
A company buying a new lorry can generally claim full expensing, relieving the whole cost in the year of purchase, and the annual investment allowance covers most other cases including second-hand vehicles. Lorries, trailers and vans count as plant. Cars do not, and are relieved slowly through writing down allowances based on emissions.
What can I pay drivers for a night away without tax?+
There is an approved industry rate for drivers using a sleeper cab, but paying it free of tax requires an approval notice from HMRC and a system for checking the expense was actually incurred. Without both, the payment is treated as pay and PAYE and national insurance are due on it. The rate is reviewed, so confirm the current figure each year rather than carrying one forward.
Which exchange rate should I use?+
For VAT, either HMRC’s published rate for the period or a market rate — but applied consistently rather than picked per invoice. In the accounts, transactions go in at the rate on the day and outstanding foreign currency balances are retranslated at the year end, with the difference taken to profit and loss.
Do I need a duty deferment account?+
Not necessarily, but it helps once volumes rise. It lets a month of duty and import VAT settle in a single direct debit rather than consignment by consignment, which speeds clearance and smooths cash. It requires a guarantee or an approved waiver, so the question is whether the benefit at your volumes justifies the cost of the facility.
Are owner-drivers inside IR35?+
Often, where they work through their own company on your vehicle and to your schedule and the end client is medium or large. Status is judged on working practices — control, substitution and mutuality of obligation — rather than on contract wording alone. Where the rules apply, the party paying the driver’s company operates PAYE on the deemed payment.
Local to you
Chartered accountants, just up the road.
We are based in Finchley and work across North London. Come in, call, or do the whole thing by email — whichever suits you.
Or call 07480 281548