I’ve worked with logistics, haulage and freight forwarding businesses for years, and one thing I’ve learned is that directors in this sector are usually sceptical of generic accounting advice.
To be fair, they’re right to be.
The accounting and tax issues in logistics are often far more complicated than many advisers realise. Between vehicle fleets, warehousing contracts, international VAT rules, customs procedures, subcontracted drivers and tight margins, there are plenty of opportunities for costly mistakes.
So rather than giving you another generic “speak to your accountant” article, I want to walk through what is actually changing in 2026, where I see businesses getting caught out, and what I would focus on if this were my own company.
Grab a coffee-there’s quite a bit to cover.
Lease Accounting Is About to Change the Look of Your Balance Sheet
Let’s start with the biggest change that many businesses haven’t heard much about yet.
For accounting periods beginning on or after 1 January 2026, the lease accounting rules under FRS 102 are changing significantly.
For an industry that leases everything from trucks and trailers to warehouses, depots and forklifts, this is a major development.
Until now, many leases have been treated as operating leases. In simple terms, that meant the lease costs appeared in the profit and loss account, but the lease commitments themselves largely stayed off the balance sheet.
That approach is disappearing.
Most leases will now need to be recognised on the balance sheet through:
- A right-of-use asset
- A lease liability representing future payments
Take a warehouse leased for £500,000 per year over ten years. Under the new rules, that single agreement could add several million pounds of assets and liabilities to the balance sheet.
Add your vehicle fleet, trailers and equipment leases, and the impact can become substantial.
What does that mean in practice?
Your gearing may appear worse
The business itself hasn’t changed, but your balance sheet will suddenly show significant new liabilities. Banks, lenders and anyone reviewing your accounts will notice.
Your EBITDA may improve
Rental expenses are replaced by depreciation and finance costs. Since those sit below EBITDA, many businesses will see EBITDA increase even though cash flow hasn’t changed.
Bank covenants could become an issue
This is the area I’d be most concerned about.
Many lending agreements include gearing ratios, net asset requirements or other covenant tests based on the old accounting treatment.
The introduction of lease liabilities could technically trigger a covenant breach despite no change whatsoever in the underlying business performance.
That’s why it’s important to speak with your lender before the transition, not after the accounts have been prepared.
You could cross the audit threshold
Because right-of-use assets increase gross assets on the balance sheet, some companies that currently qualify for audit exemption may find themselves exceeding the relevant thresholds.
That can create an unexpected statutory audit requirement.
What should you do now?
Start building a proper lease register.
Every warehouse, depot, truck, trailer, forklift and equipment lease should be recorded with:
- Start date
- End date
- Break clauses
- Renewal options
- Annual lease payments
The businesses that prepare this information now will have a much easier transition than those trying to gather everything at year-end.
Revenue Recognition: When Have You Actually Earned the Revenue?
The second major FRS 102 change affects revenue recognition.
Freight forwarders are particularly exposed because many contracts contain multiple services bundled together.
A single shipment might include:
- Freight services
- Customs clearance
- Warehousing
- Insurance
- Delivery
- Handling charges
Historically, many businesses have recognised the entire amount when the invoice was raised.
The revised rules require a more detailed assessment.
You’ll need to identify the individual services being provided and recognise revenue when those services are actually delivered.
Why does this matter?
Imagine a forwarding contract that spans your year-end.
Some services may have been completed, while others are still ongoing.
Under the new rules, you may not be able to recognise the full invoice value immediately. Revenue relating to undelivered services may need to be deferred into the next accounting period.
For many businesses, this introduces accounting concepts they’ve rarely needed before, including:
- Deferred income
- Contract assets
- Accrued income
The transition year is likely to be the most challenging, particularly for businesses that have always recognised revenue based simply on invoicing.
What would I recommend?
Review your customer contracts before year-end.
Establish a revenue recognition policy that aligns with the new requirements and, where possible, improve the connection between operational shipment data and your accounting records.
The better your operational data, the easier compliance becomes.
The Accrual Problem That Quietly Distorts Profits
This isn’t a new issue, but it’s one of the most common weaknesses I see in logistics businesses.
The problem is simple.
You invoice the customer when the job is complete.
Your suppliers often invoice weeks later.
Shipping line charges arrive later.
Port charges arrive later.
Agent invoices arrive later.
Customs costs arrive later.
As a result, management accounts can show healthy profits that don’t actually exist.
I’ve seen businesses overstate monthly profitability for years simply because they weren’t accruing for costs they already knew were coming.
Those inflated numbers then drive decisions on pricing, recruitment, dividends and tax planning.
Eventually the supplier invoices arrive and the apparent profits disappear.
The solution isn’t complicated
At every month-end:
- Accrue for known but unbilled costs
- Review profitability at job level
- Match customer invoices, supplier invoices and job files
- Investigate differences before closing the period
It’s not exciting work, but reliable management accounts depend on it.
VAT: Where the Real Money Can Be Lost
If I had to identify the biggest tax risk in freight forwarding, VAT would probably top the list.
Since Brexit, HMRC’s focus on the sector has increased, and the rules remain complex.
Place of supply
The VAT treatment of freight services depends on several factors, including:
- Where the customer is located
- Whether they are a business or consumer
- The nature of the services provided
The same service can sometimes be:
- Standard rated
- Zero rated
- Outside the scope of UK VAT
Get it wrong and the potential assessments, penalties and interest can become significant.
Maintain evidence of:
- Customer VAT registrations
- Business status
- Transport documentation
- Export and import records
That paperwork is often what determines whether HMRC accepts your VAT treatment.
Principal or Agent?
This is one of the most misunderstood areas in freight forwarding.
The distinction sounds technical, but the financial impact can be huge.
If you’re acting as an agent, generally only your commission forms part of your turnover for VAT purposes.
If you’re acting as a principal, the full freight charge may be relevant.
The difference can affect VAT calculations and reported turnover by hundreds of thousands of pounds.
Most importantly, HMRC won’t simply rely on what your contract says.
They’ll look at reality.
Questions they’ll ask include:
- Who bears the commercial risk?
- Who sets the pricing?
- Who is responsible if something goes wrong?
- Who is contracting with the customer?
If you haven’t reviewed your principal-versus-agent position recently, it’s worth revisiting.
Don’t forget CDS and PIVA reconciliations
Make sure your CDS statements, import records and VAT returns reconcile regularly.
Missing evidence for postponed import VAT accounting is a common issue and one that often attracts attention during HMRC reviews.
Corporation Tax: Areas That Commonly Cost Businesses Money
The accounting changes don’t just affect the accounts.
They can affect when profits become taxable.
If revenue is recognised earlier under the revised FRS 102 rules, corporation tax may also become payable sooner than expected.
For some businesses, transitional adjustments could create unexpected tax liabilities.
Modelling the impact in advance is far better than discovering it when the tax bill arrives.
Capital allowances
This industry invests heavily in assets.
Vehicles, trailers, warehouse equipment and infrastructure often qualify for valuable reliefs.
The Annual Investment Allowance currently provides up to £1 million of qualifying expenditure relief each year, yet many businesses still miss claims because fixed asset records are incomplete.
Another common issue is confusion between repairs and capital expenditure.
Repairs are usually deductible immediately.
Improvements and replacements often need different treatment.
A thorough annual review of the fixed asset register can save a surprising amount of tax.
Employment status
This remains a significant risk area.
Owner-drivers, agency drivers and subcontractors require careful assessment.
If HMRC concludes that individuals treated as self-employed should have been employees, the business may become liable for:
- PAYE
- National Insurance
- Interest
- Penalties
The risk increases where drivers work predominantly for one business and operate under a high degree of control.
Written contracts are important, but the reality of the working arrangement matters even more.
Group structures and management charges
Where businesses operate through multiple companies, intercompany transactions need proper support.
Management charges, recharges and cross-border arrangements should be commercially justifiable and documented appropriately.
This is an area receiving more HMRC attention than many directors realise.
If This Were My Business, Here’s What I’d Do
If I were running a haulage or freight forwarding company today, my priorities would be:
- Build a complete lease register.
- Review bank covenants before lease liabilities hit the balance sheet.
- Reassess the principal-versus-agent VAT position.
- Improve month-end accrual processes.
- Review employment status arrangements for regular drivers.
- Assess how the new revenue recognition rules affect profits and tax liabilities.
None of these issues require panic.
But they do require preparation.
The businesses that address them early will have a much smoother transition into 2026 than those leaving everything until year-end.
If you run a haulage, logistics or freight forwarding business and you’d like a straightforward conversation with someone who understands the sector, feel free to get in touch.
No sales pitch. No obligation. Just a practical discussion about what these changes mean for your business.
Ashish Paudel
Founder, Nexus Financial Experts
hello@nexusfinexp.co.uk
020 3951 3891
This article provides general information only and should not be relied upon as professional advice. Specific advice should always be obtained based on your individual circumstances.
