Scale Charges

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Sevren
Sevren Registered Posts: 101 Dedicated contributor 🦉
Hi - I can't quite get my head around the accounting entries for the fuel scale charges. I am comfortable with the entries that I make 'on the face' of the VAT return but am not sure how to factor this into the accounts.

Sorry - I am sure this is straightforward but the help in QB and googling has left me even more confused.

Many thanks

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  • NeilH
    NeilH Registered Posts: 553 Epic contributor 🐘
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    Hi

    You should debit a relevant cost account (motor expenses etc) and credit the VAT liabilty/VAT on outputs.

    The debite recognises the charge as an expense of the business - VAT it is unable to claim - and the credit accounts for it to be paid over to HMRC.

    Hope this helps.

    Neil
  • Dean
    Dean Registered Posts: 646 Epic contributor 🐘
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    NeilH wrote: »
    Hi

    You should debit a relevant cost account (motor expenses etc) and credit the VAT liabilty/VAT on outputs.

    The debite recognises the charge as an expense of the business - VAT it is unable to claim - and the credit accounts for it to be paid over to HMRC.

    Hope this helps.

    Neil


    Don't forget to recognise the private element:-

    Dr: the net amount of the fuel scale charge to the drawings/dla
    Cr: motor expenses

    Also bare in mind that this private element may not be the full restriction; it is the restriction for VAT purposes but you may need to further increase this for IT/CT purposes.

    Regards

    Dean
  • Poodle
    Poodle Registered Posts: 711 Epic contributor 🐘
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    Dean wrote: »
    Don't forget to recognise the private element:-/QUOTE]

    Sevren,

    I do not agree with Dean as a scale charge is a way of accounting for output tax on road fuel bought by a business that is then put to private use. If you use the scale charge, you can recover all the VAT charged on road fuel without having to split your mileage between business and private use.

    HMR&C publication 700/64 refers.

    Also your journal entries should be

    DR CR
    Scale charges XX
    (Gross scale charge)
    Input VAT XX
    (VAT element)
    Scale charges
    (Net scale charge) XX

    I am not sure which version of QB you have but this is the help from the version that I have

    Handling fuel scale charges

    QuickBooks can easily handle the VAT you must pay if you have employees for whom you provide fuel for business and private use.
    For each VAT period, you should calculate the output VAT that is due using the fuel scale charge table provided by HM Customs & Excise. We recommend you use a spreadsheet to do this.

    To record VAT on private fuel:

    1 From the Banking menu, choose Make Journal Entry.
    2 Fill out the end date of your VAT period and an entry number.
    3 In the detail area, enter a debit to your fuel account for the VAT inclusive amount of the fuel benefit.
    4 In the detail area, enter a credit to your fuel account for the VAT exclusive amount. On the same line, enter the VAT at the standard rate.
    5 Tick the Output button under "Show on VAT reports as."

    6 Click OK to record your entry.

    Poodle
  • Poodle
    Poodle Registered Posts: 711 Epic contributor 🐘
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    CR Scale charges (Gross scale charge)
    DR Input VAT (VAT element)
    DR Scale charges (Net scale charge)

    Sorry the entries did not transfer into my reply very well, hope that this makes better sense
    Poodle
  • peugeot
    peugeot Registered Posts: 624 Epic contributor 🐘
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    I must admit to never having heard of restricting a scale charge for a 'private' element.:001_unsure:

    Kind regards
    Steve
  • Dean
    Dean Registered Posts: 646 Epic contributor 🐘
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    Perhaps my reply wasn't overly clear but the treatment is correct. You can reclaim the fuel cost of any fuel but it is restricted by the fuel scale charge. Sevren is making the VAT adjustment on the face of the return which i'm assuming he is adding figures to box 3. These are not the accounting entires. My 'private' element doesn't refer to all the fuel purchased. It is the NET of the fuel scale charge. See this table:

    http://www.hmrc.gov.uk/budget2007/bn55.htm

    Also noting:
    Current law and proposed revisions
    6. Section 2 of the Finance (No. 2) Act 2005, provided for amendments to Section 57 of the VAT Act 1994 to allow fuel scale charges to be calculated on the basis of carbon dioxide emissions. Under Section 2(7), that legislation comes into force only when activated by a Treasury Order.

    7. This measure introduces a new table with detailed provisions which set out how private use charges should be calculated.

    Note that the figures are essentially NET, VAT & GROSS. Sevren will have made the VAT adjustment on the return but you need to introduce the NET element into the accounts. Taking <140; you need to adjust for 621.28 by debiting the drawings/dla and crediting the motor expenses nominal.

    You then have to think about IT/CT, the 621.28 may not be enough of a restriction so you may wish to increase this further by another journal.

    Regards

    Dean
  • Poodle
    Poodle Registered Posts: 711 Epic contributor 🐘
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    Hi Dean,

    Clarity is everything:thumbup1:

    See now that you had progressed to the next stage of the accounts production:blushing:

    Poodle
  • Sevren
    Sevren Registered Posts: 101 Dedicated contributor 🦉
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    Many thanks all - very helpful and much appreciated.
  • Dean
    Dean Registered Posts: 646 Epic contributor 🐘
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    Poodle wrote: »

    See now that you had progressed to the next stage of the accounts production:blushing:


    Twas the initial question :tongue_smilie:

    Regards

    Dean
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