buying asset and settling vendor's debt

buying asset and settling vendor's debt

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Client wishes to buy asset for £20000 + vat, but vendor has debt on the asset of £10000.  Vendor wishes to issue Invoice for £10000 + vat and Client repay the loan debt direct to the lender.  Surely this is not appropriate, as the asset is still £20000 irrespective of the debt, and the debt settlement is simply part of the £24000 to be paid......or is something basic being missed?    VAT implications etc?

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By cparker87
28th Nov 2015 18:17

consideration
Whichever way you cut it consideration of £20,000 is being received and Should be chargeable to VAT.

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By johngroganjga
28th Nov 2015 18:18

Yes you are right, and are not missing a anything, except that it may be in the purchaser's interest to be sure that the loan has been repaid - if it secured on the asset.

But the correct figures are invoice for £24k including VAT settled by a payment of £14k to the vendor and £10k to the vendor's loan creditor.

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By turchyna582
28th Nov 2015 18:43

Thank you for the prompt responses, and the comforting comment on my own view.

I am especially pleased to see johngroganjga's  response......I have watched his input with interest and respect on many previous occasions relating to other questions raised by members.

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By cparker87
28th Nov 2015 19:01

always the bridesmaid
Thanks John :P

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By WhichTyler
28th Nov 2015 21:46

Watch out...
Is it possible that the vendor is insolvent and that if, for instance, you pay the whole amount to him it will just go to paying off the overdraft, rather than the asset finance?

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By johngroganjga
28th Nov 2015 23:07

Yes - that is why I said it might be in the purchaser's interest to pay off the vendor's loan directly.

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