Hi, a client (who prepares her own Self Assessment - I generally just keep her books tidy to save her time) has asked me if I can help with her husband's books (I know very little about his turnover etc but meeting tomorrow night).
He has just purchased a van on HP and wants my help with how to show it.
There is no VAT involved, and he would to put full cost value into 2016/17. I have seen no paperwork yet, (although we havent yet discussed any reducing balance etc).
I am having a mental block with the treatment of the Balloon payment at the end.
The balloon payment is 5000 pounds and I presume, if you have already put the whole cost of the van through already, then it doesnt affect anything? But if another loan was used to finance the Balloon payment, I guess additional interest would offset the profit?
I apologise for being so vague, but just want to double check.
Many thanks again, Lorna
Sorry for my confusing post! Was getting myself into right old pickle!! I rang Inland Revenue today and had my queries answered. Many thanks for taking the time to read this, Lorna
Was this an accounting treatment or just a tax query?
Is the contract really HP? Or lease?
Be very wary of getting info from the folk who man the phone lines at HMRC, sorry to say but they are known for giving incorrect information about tax and have no idea about accounting regulations and processes. Plus if you don't ask the 'right' question of them they defo won't give the right answer. Ie they don't delve further to check out your own undestanding of the facts.plus there is no proof of what advice they gave you so you cannot rely on it. Remember that even the VAT guides are only 'guidance' ie their interpretation of the VAT act, which as we know has been successfully challenged.
Remember the accounting part, which then includes any adjustments for tax needs to be finalised before they start submitting their tax returns online. Even for sole traders.
Also, always get a copy of any car and van contracts as often a client will tell you they are one thing and they turn out to be quite another with Hp and lease contracts etc and the way they are treated can be very different. Also when posting such questions we need to know status of the business, sole trader or limited.
Not sure what you mean by the reducing comment. Plus when they make the balloon payment there will be the other side of the double entry to consider, hence why I wondered if this was just a tax query and you are ok on the accounting side.
Slow down a little, take a step back, don't think that because a potential client has given you part of a scenario over the phone that you have to answer it immediately when you go to see them. Use the first visit as a chance to get to know them and their business, for them to get yo know you a little (the way you question them and speak to them is often enough), talk pricing, get their verbal agreement to act, take copies of any paperwork you need to query if there is any, then arrange to meet or contact them again to go through the formalities. This gives you the breathing space to do further full research on anything they have raised and answer their questions. Plus any advice you then give them is covered by your agreement.
-- Edited by Cheshire on Saturday 14th of January 2017 11:35:46 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
This is more a question than an answer. This finance method is similar to HP? PCP is it not? Lower monthly payments yet a large final payment if you wish to keep the vehicle. So with substance over form and all that jazz - treat as a HP agreement, claim capital allowances. If you pay the final £5000 you keep van and all is equal, if you do not pay the £5000 you'd have a balance left in the loan account to treat as a disposal?
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Johnny - Owner of an overly-active keyboard.
A man who can read, yet doesn't, is in no way wiser than a man who can't.
