First post. I recently started a new position (I'm a Commercial Manager) for a small/medium building company and have pushed for the company to adopt some new accounting software to make all commercial activities/supplier payments etc more efficient.
I have stumbled across a couple of issues and don't feel I'm qualified or in the right place to challenge/I don't have direct access to the company's accounting firm to ask them directly, so wanted to check here before taking up the issue with my superiors.
Our new accounting software will allow better tracking and CVR/profit/loss reporting so instead of subcontractor payments being journaled on the system, they'll be put on as proper transactions broken down into works items, rates and quantities.
Whilst going through each department's workflows I have spotted that my company offers its labour only (CIS) subcontractors use of company vans. These are owned/purchased via asset finance. I haven't worried about IR35 implications as the subcontractors can and do work for others, send subsitutions etc. The vans are charged out at £50 per week and payment is taken via deduction on weekly payments to the subcontractor, as a sort of contra-charge. The subcontractor is not responsible for any wear and tear, vehicle servicing or any costs other than fuel/screen wash/AdBlue and general care such as washing and checking tyres, fluid levels etc. They are inspected semi regularly and charged for any damage.
My concern is that by charging this way we're not deducting CIS for the van hire, nor are we charging VAT. Isn't it HMRC/the subcontractor's accountant/the subcontractor's self-assessment that determines whether it's deductable or not? Shouldn't we be treating the van hire as a completely separate element of work, i.e. invoicing & taking payment separately for the van hire? Does this affect the accounting we do for the van as an asset? I.e. now we buy a van on asset finance and calculate depreciation every month. On sale, we create profit/loss figure based on sale price vs depreciated 'books price' of vehicle. Does the fact that we hire them out have any bearing on this? What's the tax implcations for my company? Will the payments subcontractors make need to go into a profit & loss account for each van?
I can't help but think my company is in hot water and I want to politely try and protect them or at least let them know it's not right, if that is the case.
I gather there may be insurance implications etc and am making my own checks on that so only looking for accounting advice, thanks (it's complicated enough!).