I am doing the accounts for a company who has just part exchanged their vehicle for a new vehicle there is vat on the new vehicle which if i am right in saying can be recoverd in full and then no vat reclaimable on the monthly repayments. However as the part exhcange is a sale of an asset is vat payable by the company on this part exchange? if so say for example the part exchange was £8k is this inclusive of vat or vat on top?
also how would i post this in sage? so far i have posted as follows full cost of vehicle to 0050, tax on vehicle to 7302, vat on new vehicle to 2202, credit charged on finance to 7904.
would appreciate some feedback as to whether i have done this correctly.
I dont think VAT is applicable as your not selling the vehicle but having an amount removed from the overall bill for it, therefore the VAT claimed would balance itself out.
E.g. Sell vehicle for £1000 + 175 VAT buy vehicle for £8000 + 1400 VAT
Actually paying 7000 + 1225 VAT
To part Exchange you pay £7000 (8000-1000) + 1225 VAT
If the new car buyer is a VAT registered person, the part exchange is considered a sale for VAT purposes. The agreed amount is deducted after VAT has been applied to the full price of the new vehicle.
If the owner is VAT registered they are supposed to supply an invoice to the garage.
The most important thing is that under normal circumstances VAT cannot be reclaimed for a car (it can for a van), except under special circumstances eg taxi, self drive hire car, or driving instruction.
A couple of HMRC notices that you might want to check out
Edit: Forgot to add. The total price including VAT will be the cost price and unless VAT was reclaimed on the part exchange car, ther will be no VAt part for that either (becomes an excempt supply)
-- Edited by Wella on Saturday 4th of December 2010 09:32:57 AM
