A client has left me with a clean-up job on their accounts and as part of it, I have to handle the peculiar disposal of the company car they had on a finance lease. However the entries in the bank and what I see just don't quite make sense to me.
TB before disposal:
Asset: Car £17,000 (NBV)
Liability: £10,000 (outstanding finance costs, their 'final payment')
The client then tells me they were 'raising finance' and sold the car to another business, but then loaned the money to said business. The business essentially inherited the car and the revised finance costs, plus benefitted from the loan. I then see this in the bank:
Receipt: £15,000 (financing co)
Payment: £15,000 (to another company)
At this point, the car is no longer owned by my client (verified by log book), nor are they obliged to settle the finance costs of £10,000. The £15,000, however, is essentially 'loaned' to the other company though.
Ignoring the loan to the other company - which I'm treating as an other debtor - It doesn't make sense if I flush everything through to the P&L as it would show a rather bizarre £22,000 gain on disposal. Is that right? And from a tax perspective, the £15k receipt is the only taxable amount?
Any thoughts? Am I missing a trick? Many thanks.