Question asked by Steve Farrin 9 years ago
I have purchased an asset on HP and need to show the VAT. However the suppier issues a statement showing how much VAT I am paying on the monthly installments. I have added the asset with net amount and created a bank account showing the finance owed by paying for the asset from this account.
Due to the invoice from the supplier showing the VAT on my payments how do I account for this in clearbooks?
Hi Steve - no, as a leased asset it's a monthly expense, so you put the monthly cost to a P&L account code such as "Equipment leasing" (type = operating leases).
In other words you don't use one of the Fixed Asset accounts which would require you to enter details in the Fixed Asset register.
As I said though, you really should double check with the agreement that this is, in fact a lease agreement.
Best answerThank you for the assistance. Can you also confirm if this should appear as an asset of the company and be entered on the asset register?
Hi Steve - in which case it's a monthly leasing cost and not the purchase of an asset, ie as if you were hiring a car, rather than buying one.
Best you check with the actual agreement but, as I say, if the finance company is charging VAT on the monthly payments, it's not HP.
Its under a sole trader business
Hi Steve - as you are being charged VAT on monthly payments it sounds more like a lease than HP. With HP, for both accounting and VAT, you effectively own the asset and so can claim the VAT on the total, whereas with a lease, or contract hire, the payments are rental payments for VAT purposes.
The accounting treatment will depend on whether or not you are a Ltd company and the use of the asset, ie it might still be treated as if you own it.
You must 