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Selling a company car to an employee

Selling a company car to an employee

We have agreed to sell a company car to an employee, who will repay us from deductions from his pay over 2 years.

A couple of questions :

Do we need to raise a misc. invoice ? (if so, do we include VAT ?)


Can we simply Cr Fixed Assets and create a loan account Debtor to be reduced each month?

In addition to the above, we will do the usual profit / loss on disposal etc.



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By Anonymous
04th Feb 2005 18:17

Employee loan
If the loan is both (1) for more than £5000 and (2) interest-free [or at lower than IR official interest rate] then there will be a benefit in kind to declare - "beneficial loan".

If the employee is a director of a close company there can potentially be a 25% tax charge under s419 as well.

The car should be sold to the employee at market value which is compared to book value to then create a profit or loss on disposal.

Selling at less than market value could create a benefit in kind.

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By neileg
04th Feb 2005 12:00

Sale of Car
You should raise an invoice. Vat is only chargeable
a) if when you bought the car you were entitled to reclaim the input tax and you did so
b) you are selling the car for more than cost, in which case you need to charge VAT on the profit but you do not show this on the invoice

If you don't raise an invoice, you must ensure that you include the sale value in your VAT turnover even if there's no VAT charged.

I assume that the deductions from pay are from the net pay, and not the gross.

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