Import Duty

This code records costs relating to import duty. As a cost account, it normally carries a debit balance: debit entries increase the balance (recording new costs) and credit entries decrease it (for example, a credit note received from a supplier).

Real-world examples

Importer or wholesaler

An importer's freight agent pays customs duty of £850 on their behalf when a shipment clears the border, then invoices it back as a disbursement. Customs duty itself is outside the scope of VAT — it's a tax, not a supply — so no VAT is added to the duty amount: it's a debit of £850 to 5101 (Import Duty) and a credit of £850 to 2100 (Creditors Control Account), with nothing posted to 2201. The rate of duty itself varies significantly by the tariff classification of the goods — sometimes 0% under a trade agreement, sometimes a meaningful percentage of the goods' value for other categories — so identical shipment values can produce very different duty bills.

Domestic-only business

A business sourcing everything from UK suppliers never has a duty bill at all — this code stays at nil permanently. It only becomes active once a business actually imports goods from outside the UK, regardless of size or sector, and the amount involved then tracks how much of its buying is done overseas rather than anything to do with its size.

Commonly confused with

Because code 5100 (Carriage) sits right next to this one in Purchases & Direct Costs, it's a common mis-posting target. Code 5101 is specifically for import duty, while 5100 covers carriage — similar in nature, but keeping them separate is what makes the purchases & direct costs section of your management accounts meaningful rather than a single lumped total.

What a mis-posting here costs you

Posting to the wrong cost code here won't change total cost of sales, but it will distort gross margin analysis by category, making it harder to see which input costs are actually rising.

Other codes in Purchases & Direct Costs