Hi There!
I have searched and searched and there is a lot of info on cyle to work schemes but not specifically on the issue of HMRC demanding that we include sales VAT on the salary sacrificed amount. I use Sage payroll and this seems to not have any feature to do this automatically. My thinking is just to not claim purchase VAT on the purchase of the bike and then to not charge sales VAT either on the salary sacrifice. Seems simple and the VAT man will not be out of pocket in total.
Otherwise any suggestions on how to do it properly on Sage? All i can think of is an extremely complicated journal, every month, involving the sales VAT controll account. I know that if i seek professioanl advice on this from my accountants it will cost ££££ and all for a scheme that the goverment wants to encorage and is giving no info on?!?
Many thanks in advance for any help on this.
Replies (19)
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I have searched and searched and there is a lot of info on cyle to work schemes but not specifically on the issue of HMRC demanding that we include sales VAT on the salary sacrificed amount.
Am I the only person on here who can use Google??
https://www.google.co.uk/search?ei=gkgqW9u7DMOuUpbuurgC&q=Cycle+to+work+...
I've certainly seen it suggested before that HMRC aren't concerned if you take the don't claim it / don't charge it approach.
Obviously you won't find anything in writing
I've certainly seen it suggested before that HMRC aren't concerned if you take the don't claim it / don't charge it approach.
Obviously you won't find anything in writing
I wouldn't rely on that ... HMRC do still consider that VAT is due on the sacrifice amounts whether or not the initial VAT is reclaimed, so this is not a recommended option.
Two wrongs don't make a correct VAT submission, even if fiscally neutral.
This is broadly why the cycle scheme is not worth the bother. I would just give interest free loans as with season ticket etc...
You don't have to make any amendments in the payroll, just run that as normal. Then post a recurring monthly journal into sage for the VAT amount, making sure the VAT side of the journal is posted with T1 (so it will be picked up on the VAT return). Dr - P&L (T9), Cr - VAT account (T1).
Well quite.
People who insist on using antique software need to learn the ancient art of the journal!
Hi Rjoconnor81,
How do you post this when the salary sacrifice amount includes VAT and the journal entries go by the Net Amounts?
Thank you
Hi Andy,
So how did you eventually post them?
The example given via this link, as below, will leave the salary journal unbalanced by the VAT amount (https://www.cyclescheme.co.uk/employers/employer-updates/cyclescheme-hmr...):
If the salary sacrifice amount paid by the employee includes VAT:
Monthly salary sacrifice inc. VAT = £600 / 12 months = £50
Net value = £50 / 1.20 = £41.67
VAT to be accounted for (Output Tax @ 20%) = £50 – 41.67 = £8.33,
I was otherwise thinking to post the salary sacrifice as a credit to the sales code as HMRC sees it as a monthly bike hire and therefore a revenue.
It would have been Cr Bike Hire (e.g. NC4000) £41.67 on T1 with VAT amount £8.33, but the salary journal will be out by £8.33.
Why's that then? In my book £41.67 + £8.33 = £50.00.It would have been Cr Bike Hire (e.g. NC4000) £41.67 on T1 with VAT amount £8.33, but the salary journal will be out by £8.33.
Hi Wanderer,
That's because the journals look at the Net amount. Or have you a way around this?
Thanks
Why would they do that???That's because the journals look at the Net amount.
Dr Salaries £50.00
Cr VAT liability £8.33
Cr Bike hire £41.67
Hi Wanderer, That's exactly my issue. The journal in Sage only has the field for Net amount and not for VAT. And for the amount to be picked up in the VAT return as a VAT liability, it needs to use a VATable code. Or what am I missing?
Not that familiar with Sage however why not issue a sales invoice? Then settle that sales invoice by a journal.
Not that familiar with Sage however why not issue a sales invoice? Then settle that sales invoice by a journal.
Yes thought of the sales invoice option just for the salary sacrifice amount as this will allow the use of the vatable code, but this means I will not be able to post the full salary journal.. And what do you mean by settling the sales invoice by a journal?
It's a 3 line journal in Sage.
Dr 7000 Salary
Cr ???? Bike Hire
Cr 2200 VAT
Hi Paul, I've never manually posted journals to the VAT control accounts. Are you saying that it can be journalled to 2200 Sales Tax Control (therefore on T9 as a it's a journal), and it will be picked up in the VAT Return? I was going to contact Sage today but was so busy it will have to be Monday now.
The bike hire, as viewed by HMRC, will be a service revenue, so can be set up as a 4000 code in Sage.
No the journal to the control account would have to be T1 or it would be ignored on the vat return so:
DR 7000 £50.00 T9
CR 4000 £41.67 T1
CR 2200 £8.33 T1