Double Entry Dilemma: Employee Repays Loan from NIC Savings from Salary Sacrifice (EV Scheme)

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Etemplar
Etemplar Registered Posts: 2 New contributor 🐸
Hello,

I work for a company (I'll refer it as "Com Z") which recently has introduced an Electric Vehicle Scheme to its employees. The concept of the EV scheme is that this is cost neutral to the Com Z. In fact, this creates a very small income to the Com Z.

Currently the following is done:
An employee (Mr. X) signs up for an EV - this triggers Com Z receiving a couple of invoices: one for the lease, the other for admin fees and insurance every month. Those are paid to the suppliers by the Com Z on behald of Mr. X. The amounts paid are treated as Mr. X's loans to the Com Z and the double entry for this is:
Dr. Employees Loan and Cr. Accounts Payable

Mr.X's employment loan will be repaid partially via his salary sacrifice and the rest by NIC savings

Example:
Invoice from Supplier 1 for the admin charges & insurance = £250
Invoice from Supplier 2 for the car lease = £1,000 (which results in £1,250 debited to Employees Loan)

Monthly salary deduction from Mr. X at £1112
This leaves £138 outstanding employee loan which will be repaid via NIC savings of £154.
But the Com Z will incur P11d liability of £12 which will be added to the employee's loan.
At the end, £4 is essentially an extra income to the Com Z.

My questions are
1. What is the debit side when we reduce Mr. X's loan by the NIC savings: Dr ? £154 Cr Employees loan £154
2. What is the best place to recognise £4 in debit - it is also a part of NIC savoings
3. Is Misc Income best place to recognise the £4 extra income or any other suitable place?


Summary of double entries:
1. Dr Employee Loan £1250 Cr Accounts Payable £1250 (Comp Z paying the suppliers
Dr Staff Costs Cr Salary Control
2. Dr Salary Control Cr Employee Loan £1112 (Salary sacrifice)
3. Dr ?? £154 Cr Employee Loan £154 (NIC saving)
4. Dr Employee Loan £12 Cr PAYE Liability (P11d payable from EV scheme)
5. Dr ?? £4 Cr Misc Income? £4 (remaining NIC saving)

My questions are mostly about how to treat the NIC savings without affecting the PAYE Liability account in the balance sheet. If I were to debit £154 and £4 in PAYE Liability, then this account will have balance left on a monthly basis which I want to avoid.
I've been working in Finance for a long time but I'm now stuck and don't know what to do with double-entries for NIC savings. Any help would be much appreciated!
Thank you.
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