Hi everyone. I was wondering if anyone can help me with an issue.
I have a client who bought a second hand car last quarter. He uses the fuel scale charge for the petrol so vat is claimed on petrol and then run through a fuel scale charge for VAT return. The car was bought as "business use" because their Accountant has approved this in the past. The CO2 emmissions for this car is high so the Accountants have suggested that they sell the car and wipe out any existence in the books which includes removing the Asset and moving to Directors Loans which I have done but they also want me to remove the Petrol.
This is where I'm unsure because the petrol has already been included in past VAT returns - Fuel Scale etc. I can move the petrol costs to Directors Loans but do they have to pay back any VAT claimed through the Fuel Scale system or whatever is the correct terminology or do I just move the total cost of petrol for that period including VAT to directors loans ie not breaking the VAT out to go back onto VAT return for this quarter. If that makes sense as I wasn't quite sure how to write this.
I am posting the query here because the Accountants will charge him if I call them (so helpful they are) so I'm hoping the great support given in this forum can advise me.
If the company was paying the fuel scale charge, they were paying extra VAT (not reclaiming) based on the charge - so they would be entitled to reclaim the VAT paid on the Fuel Charge if you are reversing the fuel costs.
The director has repaid the company the VAT the company paid on the VAT, so the companhy is also entitled to recover the VAT the they paid on the fuel charge.
Using a spreadsheet it should not be difficult to work out:-
1. The net cost of the fuel. 2. The VAT on the fuel 3. The scale charge on the fuel 4. The VAT on the scale charge on the fuel.
The director repays (1+2). The company then adjusts the next VAT return by the amounts (1+2) and (2+3) as reversal entries based on the original transaction totals.
Is the director going to then claim business miles instead and will you be claiming VAT on the petrol element of the mileage allowance paid?
If you have a spreadsheet for your records, you can just post a single transaction for 1 & 2 and another single transaction for 3 & 4.
If the director is now going to claim mileage allowance then he must maintain a mileage allowance record. To claim VAT on the petrol element of the allowance, he must supply fuel bills which cover the Input VAT amount of the claim.
