Car on Contract Purchase

[dflongmuir]

I have recently ordered a car on a Contract Purchase basis and need some help with the best way to account for it in my books.

The contract will be over 2 years with a balloon payment at the end. Basically the contract is as follows:

£500.00 deposit
23 payments of £212 with a £125 documentation fee with first regular payment.
Balloon Payment of £12,000.

I intent to hand the car back rather than paying the balloon payment at the end.

I understand that this will show on the balance sheet as an asset and will be depreciated accordingly but I am not sure how to account for the payments/interest in my accounts.

Any help appreciated as always.

[Lease4Less]

Why is your home page pointing to FVL?

If you are working for FVL then you should know the answers to these questions.

http://www.ukbusinessforums.co.uk/forums/showthread.php?t=157288&page=3

You also put in the above thread that you supply vehicle on Contract Purchase, so if you are selling these agreements you should definately know the answers.

[Stretchy]

Busted. Setting up a conversation for a bit of spam maybe?:D

[MyAccountantOnline]

To quote from one of your previous posts -

'' happy to admit at this point that I am a sales executive for a leasing company''

I am therefore surprised your company cant help you with this one;)

[dflongmuir]

99% of the cars that I supply through work are on Lease agreements, not Contract Purchase.

I am definately not trying to spam and am looking for advice personally. This conversation has nothing to do with fvl. I am part time self employed and it refers to that part of my income.

I am in sales, not accountancy which is why i was politely asking for advice. It is reply's like this that make me think twice about using a forum like this. If anyone finds my post to be offensive of inappropriate then please have it removed.

[Cornish Steve]

It's not uncommon for new members to set themselves up nicely for a bit of self-promotion, which is why you're seeing a little suspicion here. You've explained yourself, though, so maybe you'll get the help you need. Don't take comments personally: You have to be thick-skinned when seeking advice at a public forum. If you persist, you'll see the value of this place.

[dflongmuir]

Thanks Cornish_Steve.

I can see why that would happen and again I appreciate any advice I receive.

[Lease4Less]

If you are genuine (and you still haven't expalined why your home page points to FVL), then we would need to know what vehicle it is as the CO2 emmissions effect the write down allowance.

As things currently stand:

You can claim 100% of the purchase price in year 1 if 110g/km or below, 20% or the written down value if between 111g/km and 160g/km, and 10% of written doen value if above 160g/km

And you can claim interest charges against corporation tax.

[dflongmuir]

Thanks Sorry I should have explained that I operate as a sole trader.

The vehicle has emmissions of 221g/km.

I am trying to work out if it is better to run it as an asset in the company's accounts(if that is even an option) or just claim a 40/25ppm.

I will remove the link to fvl as my employment there is not relevant to anything that I post here.

[Lease4Less]

Thanks Sorry I should have explained that I operate as a sole trader.

The vehicle has emmissions of 221g/km.

I am trying to work out if it is better to run it as an asset in the company's accounts(if that is even an option) or just claim a 40/25ppm.

I will remove the link to fvl as my employment there is not relevant to anything that I post here.

Okay, you need to ignore the monthly payments and focus on the purchase price of the vehicle.You can write down 10% the the purchase price per year over the course of your contract. For example assuming the vehicle value is 15K then in year 1 you can offset £1,500, and in year 2 £1,350

[dflongmuir]

Thanks very much for your help on this. I thought that this was the case.

Does this mean that the deposit paid is irrelevant.

Also, if the vehicle also has a certain amount of personal usage associated with it does this affect the amount that I can write down? or can I just pay for the fuel separately for example.

[mr. mischief]

The writing down allowances are restricted to business usage. So if the allowance comes out at 2,000 for the year, and you have 80% business usage, claim 1,600.

If the opening tax value is 10,000, the carried forward value is 10,000 less 2,000 so 8,000.

I have a feeling that these round % figures could see more challenges over the next few years, they are such an easy hit for HMRC - "I reckon your business usage is 50% not 80%, can you show me otherwise?"

So all my clients doing these are advised to keep mileage records for at least one month per year, they can then answer this question - "yes I recorded my detailed mileage for Month X and here is the result of that".