Hi Guys
I have recently setup a cycle to work scheme and finding it difficult to finalise the accounting entries. I have done some research on the website and cannot find any solid information that would confirm my accounting is correct.
Below a bit of background
Bike bought for £1990.83 + VAT 398.17 = £2389
Opted for the option to give the benefit of Ni saving back to the employee so per month I am deducting from employee £174.94 and I have £24.14 of employer contribution saving
Those two amounts make up the £2389/12= £99.08
Accounting entries
1) Purchase of the Bike as a fixed asset and claim back the output VAT. Straight forward my only question would be around depreciation should we depreciate only for 12 months (length of Cycle to work scheme, I know employee could choose not to buy it back at that point)
2) Monthly payroll adjustment journl entry
Salary is sacrificed by the £174.94
Then I was planning on doing as follow
Create a P&L Account name Cycle to Work Scheme
Journal 1: Employee Salary Sacrifice and VAT | ||||
Staff Remuneration | Dt | 174.94 | Being Employee sacrifice | |
Cycle to Work Scheme | Ct | 145.78 | Being Employee sacrifice minus VAT | |
VAT | Ct | 29.16 | VAT of the employee sacrifice | |
Journal 2: Company National insurance saving | ||||
National Insurance | Dt | 24.14 | Nier Saving | |
Cycle to Work Scheme | Ct | 20.12 | Nier saving minus VAT | |
VAT | Ct | 4.02 | VAT of the Nier Saving |
This way the cycle to work P&L account after 12 months had credited back the original net purchase amount £1,990.83 the VAT claimed back as been paid back.
Would the Nier saving given back to the employee become benefit in Kind?
I would really appreciate your advise on this.
Many thanks