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Sale and leaseback -accounts/vat/CA

Sale and leaseback -accounts/vat/CA

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Summary:

Client buys machinery from Holland (no vat) paying in four instalments (over just under 4 month) £135k (in Euros equivalent) final instalment December 2014.

In January 2015 a major high street finance company advanced £94k.

I have seen a sales invoice from the finance co for £135k + vat £27k and a Lease Purchase Agreement showing Cash price of goods inc. vat £162k less "deposit" £68k - total finance £94k

The client has entered the original purchase in fixed assets (no vat) and the introduction of the finance loan. Nothing else.

Before I contact the client I'd like some thoughts on how I see what should have happened:

1 VAT - entry should have been made in September 2014 in boxes 2 4 7 & 9.  No intrastat declaration as under the limit

2 Sales invoice for sale of goods to Finance company £135k + vat £27k account for vat

   Enter purchase invoice from finance company and claim input vat cancelling out the output vat on sale.

3 Accounts and capital allowances - not sure here whether the disposal and reacquisition needs to be reflected? One source suggest "If the leaseback is a finance lease, no sale of the asset is recognised for accounting purposes and no profit or loss arises on sale" - just struggling to reconcile the vat / accounts and CA treatment.

Any views greatly appreciated.

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