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Initial rental lease car (Sole trader) - BRAIN FOG

monkeypuzzle47monkeypuzzle47 Feels At HomeMAAT, AAT Licensed Accountant Posts: 134
Can somebody advise, as hmrc cannot give me an answer this evening.
Sole trader client took out a lease carAug 15. I know that i need to disallow a flat rate of 15% due to higher emissions. My question is what do we do with the initial rental lump sum? Does this need to be spread out over the entire term? I would not imagine the entire amount would be allowable in the first year. Thank you in advance.

Comments

  • 98emrm98emrm Registered Posts: 10
    edited January 2017
    For those that will come along shortly, as a starter, you will need to tell them what kind of lease it is.
  • monkeypuzzle47monkeypuzzle47 Feels At Home MAAT, AAT Licensed Accountant Posts: 134
    PCH - Contract Hire, thank you.
  • monkeypuzzle47monkeypuzzle47 Feels At Home MAAT, AAT Licensed Accountant Posts: 134
    My i add the initial payment represents 6 months.
  • 98emrm98emrm Registered Posts: 10
    Nobody wants to help you!

    What usually happens is ... 36 month rental period, with 6 months up front ... there won't be any payments in the final 6 months.

    If
    that is the case, you have 6 months that need to be taken to the balance sheet (prepayment), and the cost will be release in the final 6 months ... which may or may not straggle year ends.
    monkeypuzzle47
  • monkeypuzzle47monkeypuzzle47 Feels At Home MAAT, AAT Licensed Accountant Posts: 134
    thank you - update!! I have now established the advance was one initial advance payment.

    36 payments comprising of as follows..
    1 advanced payment 2208.60 03/08/15
    First regular payment 368.1 10/08/15
    then
    34 monthly 368.10

    As the car will be returned on the 36 month i am now more confused as to deal with the advanced payment as there are no periods where they will have the car with no monthly payment. Just taken advice from a chartered accountant who said the original deposit can hit the P and L in one go?

    Still want to double check and check again:)

    Hope i am making sense. :-)


  • TreadStoneTreadStone Feels At Home AAT Licensed Accountant Posts: 280
    I would treat the initial payment in the same way.

    Although it's effectively 6mths payments, it's essentially an "expensive" single month's hire.
    monkeypuzzle47
  • monkeypuzzle47monkeypuzzle47 Feels At Home MAAT, AAT Licensed Accountant Posts: 134
    Thank you for your reply TreadStone and 98erm :)
  • 98emrm98emrm Registered Posts: 10

    I would treat the initial payment in the same way.

    Although it's effectively 6mths payments, it's essentially an "expensive" single month's hire.

    I agree.
    monkeypuzzle47burg
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