We have bought a car to be used as a company car by one of our directors ....
As we cannot reclaim the VAT on this, is the double entry simply :
Dr Fixed Assets Gross Value
Cr Purchase Ledger Gross Value
i.e. post full value to FAR and not separate VAT ?
brian
Replies (5)
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New Car
Brian,
if it came with Road Tax, I would charge the Road tax to P&L and capitalise the rest. Remember the director will be cahrged on his P11D for the full cost of the car including any accessories.
I take it you mean, Dr Fixed Assets Motor vehicles and credit Trade Creditors?
In a word .....
Yes! Assuming, no p/x disposal, that it is a company car and not an expense that the director will repay, that it was bought for cash (oh nearly forgot we shouldn't say 'cash' anymore it might be misconstrued) and not HP/lease/contract hire etc. etc.
A little more to do...
You will need to build in the additional features of buying on HP eg. interest, credit charge, admin charge. These should be written off in the P&L and not form part of the gross cost of the motor. The previous correspondent's note on road tax is of course totally valid.
P11D value
Just a note of warning where a company buys a second hand car - the director will be taxed on the benefit at list price when new. In cases of small owner managed companies where a second hand car is the economic option it could be more effective for a sole director to purchase it himself and claim AMAP mileage allowances.