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Freight forwarders and importers

A forwarder that uses its own duty deferment account for clients pays HMRC on HMRC's date, pays hauliers and ports on theirs, and gets the money back when the client settles its invoice. The turnover looks big and the margin looks thin, because a lot of what runs through the accounts was never the forwarder's income in the first place.

Tell us what's happening How money moves in this sector

How money moves

HMRC and suppliers are paid on fixed dates, clients pay on theirs

As an illustration, duty deferred on goods released on 3 March is collected by HMRC on 16 April (or the next working day). If the forwarder recharges it to the client that week on 60 day terms, the money comes back in early May, weeks after HMRC has been paid.

Duty and import VATPaid out

  1. Client's goods declared on the forwarder's deferment account
  2. Deferred through the calendar month
  3. Collected by Direct Debit on the 16th of the next month

Third-party chargesPaid out

  1. Haulage, port and storage charges incurred
  2. Paid on the supplier's terms

Client billingIncome

  1. Duty, charges and the forwarder's fee invoiced
  2. Client settles on its credit terms
  3. Forwarder reimbursed

The forwarder carries the difference: money out on HMRC's and suppliers' timetables, money back on the client's, for every client using its account at once.

Import VAT is a separate question from duty. A VAT-registered importer can account for it on its VAT Return rather than paying it upfront when goods are imported (HMRC guidance on postponed VAT accounting), so how much import VAT a forwarder ends up carrying depends on how each client imports.

Where the sector gets misread

What a generalist lender sees, and what's actually happening

What a generalist lender readsWhat is actually happening

Large turnover on a thin margin

Where duty and third-party charges paid for clients are recharged through the forwarder's own invoices, turnover includes money that passes straight through. The forwarder's real income is its fees and its margin on the services it provides.

Customs charges as the client's liability

A forwarder acting in its own name on behalf of an importer is jointly and severally liable for the customs debt. A client that doesn't pay can leave the duty with the forwarder.

A guarantee as a fixed cost of holding a deferment account

In Great Britain a UK-established business that meets HMRC's criteria can apply for a waiver, so whether a guarantee is needed at all is the first thing to check.

The measure that matters

Duty and disbursements carried, not turnover

The useful numbers are how much duty and third-party cost the business pays out for clients in a typical month, how long clients take to pay it back, and how much income is left once the pass-through is stripped out. Those show both the real business and the real size of the gap.

Applying for finance on headline turnover that includes recharged duty and disbursements tends to distort both: the business looks bigger, and its margin looks weaker, than it really is.

Where finance fits

Usually a credit line for the recurring gap, with the guarantee as a separate question

Your situationUsually fitsNot this
Recurring duty and disbursement gap across the client bookA credit line sized for the recurring need, or trade and import financeA one-off term loan
HMRC has asked for a guarantee on the deferment accountCheck the waiver test first, then a duty deferment guarantee if it isn't metAssuming a guarantee is mandatory
Goods cleared, genuine customer invoice outstandingInvoice financeTrade finance, which is the wrong stage by then
A facility can carry duty and disbursements until a client pays. It can't make a client on long terms pay any sooner, or take the customs liability off the forwarder.

An importer doesn't have to hold its own deferment account: HMRC's guidance expects importers to agree with whoever handles customs for them whether they need an account or the agent will use its own. Forwarding is also one stage of a longer import cycle, set out on trade and import working capital. If the business is sound and the facility simply doesn't reach the stage where cash is trapped, that is facility mismatch.

Sources

Where these points come from

Talk it through

Need another perspective?

Describe where things stand in a sentence or two: who pays, how, and where the gap sits. We'll tell you whether it's something we can help with. There's no charge for this.

Your enquiry is read by a person at Established Finance, not a call centre or an automated queue. We use it only to work out what's likely to fit and reply to you. We don't share your details with anyone else unless we introduce you to a specialist partner, and only with your agreement at that point. Sending this doesn't appoint anyone or create a professional engagement, and there's no obligation at any stage. See our privacy policy.

What happens next

  1. A person on our team reads it against how businesses in this sector are actually paid.
  2. If we can help, we introduce you to a specialist partner we have vetted and tell you who they are.
  3. No charge and no obligation at any point. You decide whether to go further.
Adam Parker

Adam Parker

Founder of Muswell Rose Consulting Ltd, which trades as Established Finance · former Managing Director of Penny, an invoice finance business, with 15+ years across mortgages, commercial finance and fintech lending.

Last updated:

Practical questions

Before you get in touch

Does HMRC still need a guarantee on my duty deferment account?

Not always. In Great Britain a UK-established business can apply for a guarantee waiver if it has no serious or repeated customs or tax infringements and no serious business-related criminal offences in the past 3 years, and has held positive net assets (excluding goodwill) for the past 3 years or its trading period if shorter. Check the waiver test before arranging a guarantee.

Do I have to pay import VAT at the border?

Not necessarily. A VAT-registered importer can account for import VAT on its VAT Return instead of paying it upfront, and does not need approval to do so. Customs duty is a separate charge.

What information do I need?

To start, just a description of what’s actually happening in the business. If it progresses, the specialist partner will ask for the usual things: recent accounts, a sense of turnover and trading history, and details of the specific need.