Company Car leasing

Company Car leasing

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How do you account for a high value company car leased over three years with a final single payment in the fourth year, but if the car is sold the company receives 95% of the sale proceeds?
The lease is payable monthly plus VAT, 36 payments (no deposit) with a final annual payment equal to one months lease. The company never owns the car and it can only be sold to a third party with the sale invoice being produced by the lease company.
The lease company insists that the car can be shown in the company accounts as an asset, with the lease payments as a liability, but as the lease payments exceed the value of the asset, where does the excess go and what about the residual value from the ultimate sale proceeds?
Assuming only 50% of the VAT is recoverable one assumes the remaining 50% is a p&l charge. The lease company sends monthly VAT invoices which become a problem if one has already posted the full liability.
John Stenhouse

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