Can anyone tell me how I should deal with this. A client has bought a new tractor which was part exchange for an old tractor and vat was paid on the part exchange. This old tractor has never been recorded as an asset, it was acquired from my clients father in exchange for covering his work when needed. There are no records anywhere for either the purchase of the asset (although it was never purchased) or for the work in exchange which is ongoing.
Can anyone tell me how I would record the acquisition of the old tractor as it has to been in the accounts somewhere for the part-exchange.
Hi Rachel Can of worms this one. I seem to be asking more Qs/issues in my first posts at the mo, but some of these are just for you to consider:- 1) When was the tractor exchanged from Father to son? Sounded years ago until you mentioned the work for the exchange is still ongoing. So it's seems you can enter it at the 'going' rate price at time of exchange, as you would say by bringing other personal assets into the business, or by the amount they consider the exchange of services by the father(?)......I'm guessing in your area you can get an indication of that from a local dealer/auction house? 2) the other side of the exchange is of course the effective cash being paid for the services of the father. (i) Depending on the nature of the work - Effectively your employee is now operating a payroll system that is not being reported, so this aspect needs considering. It may well be that the amount being 'paid' sporadically as the father works is under the threshold of having to operate a fully reportable PAYE scheme. Care that the exchange allows for 'minimum wage' Or.
(ii) if this is consultancy type or for say building work, rather than say hay making then you will need an invoice from the father as work gets done and the effective exchange is repaid.
NB - this is classed as Barter, so check out with HMRC, as this is considered tax/vat evasion if not dealt with properly
NB 2 - the father needs to include the income from this on his personal tax return under the option (ii). Under the other.....PAYE should cover it if you do it right.
3) Vat issues Is your client/father vat registered? As if yes then the sale of the tractor would need to be accounted for under usual vat rules. Also - just to double check, did the company buying the old tractor not issue a vat invoice to account for this under the second hand margin scheme? Another spanner in the works!
-- Edited by Cheshire on Wednesday 27th of January 2016 10:02:25 AM
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
