'PCP' for a business - treatment in the accounts

'PCP' for a business - treatment in the accounts

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Hi

A client is considering a PCP agreement to buy a car for his employee through his Limited Company.

Although I know about such agreement as I have one myself (personally), I'm wondering what the correct treatment is in the accounts.

I initially thought the monthly payments would be included in the P&L acct (and 50% VAT reclaimed), then when the car is returned, the payments cease.

However, I then started searching in a few forums just to see what others thought and there seems to be some who think it should be treated as a HP agreement.

There's also the added implication of the director using a private vehicle in p/ex which seems straightforward accounting-wise if it is treated as HP, but if it is as a lease, then how do I bring in his private vehicle and credit his loan account (the only way I could think of was to debit the balance sheet and w/o over the term of the lease?).

I wondered whether anyone could point me in the right direction.

Many thanks

Chicka

Replies (4)

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By duncanedwards
13th Aug 2014 11:18

Just wondered

As I believe PCP stands for personal contract purchase, is business use permitted?  It's obviously important to establish for insurance purposes - and probably VAT too.

 

Not accounting but ...

http://www.telegraph.co.uk/motoring/news/10683988/Is-PCP-finance-a-good-...

Thanks (1)
Replying to Matrix:
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By chicka
13th Aug 2014 20:50

Yes although it is called a personal contract purchase the garage offer them to businesses.

I just need to know whether it would be classed as an asset and treated like HP or whether it is like a lease and therefore written off in full (ex 50% vat) in the P&L acct - without any paperwork I cant check the wording.

Thanks

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By chicka
13th Aug 2014 21:11

Thank you so much - that seems to explain everything! I'll definitely download it for future use.

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