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Commercial vehicle HP balance on Incorp

Possible treatment?

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Hi everyone

Hoping someone may be able to guide me on this.

I have a client who began trading through his newly formed Ltd co as of 1 April 2019.

As at that date there was a £17k HP balance outstanding on his commercial vehicle which we want to introduce into the ltd co along with other assets of his ST business.

Is it possible to continue on the HP within the company on the basis that the sole director and shareholder has incorporated, but the business is effectively a continuation of the ST business? i.e. debit FA, credit HP balances?

Alternatively are you able to amend the names on an HP agreement part way through?

As it turns out the company has since repaid the balance on the HP agreement anyway.

A little guidance would really be appreciated!

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By LAKE
22nd Oct 2020 11:11

1/4/19? I would suggest the client would need to liaise with the HP company. My understanding is a novation agreement would be required. The vehicle would not become the property of the Limited Company just because you introduced it in the accounts.

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By johngroganjga
22nd Oct 2020 11:28

As the HP has already been repaid this is largely academic, and there is nothing to discuss with the former provider of the HP finance.

I would avoid treating the HP finance as ever having been a liability of the company, and debit the company’s repayments of it to the shareholder’s loan account. I would introduce the vehicle to the company’s balance sheet only when it became unencumbered with the HP finance.

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Replying to johngroganjga:
Psycho
By Wilson Philips
22nd Oct 2020 12:24

+1

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RLI
By lionofludesch
22nd Oct 2020 11:35

Is the interest content significant ?

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By Calculatorboy
22nd Oct 2020 13:27

I'd put it in as hp, if company agreed to undertake to make repayments, and sole trader assigned vehicle on completion , substance over form , academic anyway

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By Calculatorboy
22nd Oct 2020 13:30

Ps if you don't include it in company, there is also issue of asset retained by soleman

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