I've been 'tidying up' the books of a new customer. They've been pretty well kept, actually, but there is one funny transaction.
The customer is self employed and owns a van which is just used for work, so actual expenses go through the accounts rather than mileage. But he borrowed his dad's van to use for work for a while and in return paid for the tax on the van. There is no paperwork for this.
So how shall I account for it? I've got a couple of ideas but they don't seem quite right so I'd be interested to hear some suggestions.
dr motor expenses, cr bank ( or source of payment), then arrange for a proportion of the expense (where van is not available) to be added back in the tax comp.
Thats prob what i would do. That would allow a tax deduction to be fairly accurate.
Make a note and arrange for a protion of the expense to be added back in the tax comp for the period there was no personal use.
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Forgive the typo's I generally do not proof read. Just lazy I guess!
Thanks...but I'm not sure we're talking about the same thing lol! He's got a van which he normally uses, but his dad lent him a van for atime as a one-off thing and in return the son paid the tax on that van ie his dad's van.
basically the method above would allow the payment to be brought into the financial statements and the tax deductable proportion of the expense would be allowed throught the tax computations. the tax deductable proportion of the expense relates to the number or weeks or months he had use of the van. hope this makes sense typing from phone.
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Forgive the typo's I generally do not proof read. Just lazy I guess!
I would put the amount through as normal on the accounts.
I think for the computation, it would depend on what % the amount paid comes to. Not sure how much the tax on a van is, but if less than 1% of the total motring expenses, is it worth it to deduct? You could bring in the argument to claim for rental of the van etc etc to offset the tax paid?
It's the idea of rental that's bugging me, that the amount paid represents a contribution to all costs, even though it was the tax that was actually paid.
