I have an interesting problem but for now I will stick with the bookkeeping one and hope it interesting enough to distract you from what ever it is you are supposed to be doing.
I'll set the scene and keep it brief(ish)
A client set up a Ltd Co. Prior to starting the co. he was working for himself. He has a van on finance in his own name.
He wants the new business to pay loan and to put the van to the company.
As far as I understand it, there shouldn't be a problem with transfering the van ownership to the company by setting up a Directors loan account and CR an amount, say to cover the principle amount of the loan (HMRC use vehicle transfer in their example of directors loan accounts).
That just leaves the interest. Any ideas?
Or can it be simpler than that? Just transfer the van for a consideration and the company pays the loan + claims the interest as an expense (concerned about the benefit in kind implications)
I do not know if the finance agreement has transfer restrictions but for now I'll assume not
I am not sure if my answer can help with all of your query but here goes.
For a client I work (Director & Ltd company) for has just bought a company car and the garage put the finance through in his name instead of the business name and all of the paperwork was in his name. I spoke to the clients accountants about this as I had the same issues as you and their reply was that it was ok to have the payments go through the company and deal with the interest payments in the usual way, if the company were to default on the paments the director would be liable for continuing the payments which would be the same if he gave a directors guarantee and the company arranged and paid for the finance.
With regard to benefits in kind it should be dealt with in the usual way as a company vehicle
the key to this seems to be that the van is still on hire purchase so it does not belong to your clients in order to transfer it to the company. (I appreciate the substance over form here but regardless of that it is still not actual ownership by your client so they are looking to sell something to their company that they do not actually own).
One thing to look at of course is the loan agreement. The clients say that the van is on HP but I would confirm with them that this was not merely taken out as a conventional loan for the purpose of buying the van which is something quite different.
If that were the case then the van is not secured against loan so could be sold / transferred to the company without issue but the unsecured loan would still remain in the clients private names.
Various other options may be for the company to purchase the van from the HP company making it an asset of the company which would make the interest an allowable expense. Or for your clients to retain ownership and charge the company the mileage rate to the company for business miles traveled.
Hope that this helps,
talk later,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
To use one of Shauns favourite sayings, the van is wholley and exclusively used for the business.
I am just trying to work out what his best option are.
If he "sold" the van to his Ltd Co for the outstanding balance and accrued interest but left the money in his directors account (at this early stage the Co could not pay him cash and hasn't been trading long enough to be able to get a loan). The only thing that is lost is the interest but he can't claim, it as it is anyway , and if the company owned the van it would simplify the running costs/ expenses and at least a depreciation allowance could be offset against the profit.
How does that sound? It sounds like a plan to me but if anyone can offer a different solution I am open to suggestions. Or knows of any rule in the Companies Act etc that might make this an unwise move
The key here is setting a transfer value that the van could be sold for in an arms length transaction.
All you need is for the client to buy a copy of glasses guide for the month that he sells the van to his company and to file that away in case the transaction is ever questioned.
Sell the van at open market value for the condition and mileage of the vehicle. Your client could even come away from it with a paper profit although as you state the company cannot yet afford to pay him the money for the vehicle so it will just have to sit there until there's enough cash in the company to pay it out.
You will need to check this but isn't it a case that vans (not cars) are valid for AIA? Assuming that's the case he could if it made sense for the tax position of the company write off the whole lot in the first year.
My two fingers and thumb are definitely working overtime today!!!
Oh, and just so that your grip on reality is not torn assunder by my not quoting the companies act or any financial reporting standards. For the arms length transaction bit above refer to FRS5, Reporting the Substance of Transactions... You just knew that I would sneak at least one FRS in didn't you!
talk later,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
