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PCP car finance bookkeeping

  • Student
  • 2 posts
  • # 117843

I’m a bit confused by the bookkeeping for the myriad of car financing that is out there. I’ve done the typical google search and there are such differing opinions on how to process a PCP agreement, some say treat as hire purchase, with a loan account, others as a lease. These two seem to have very different consequences on the amount that can be offset against tax as an expense. If there is no intention of making the final balloon payment and you were just using the PCP effectively to hire the car for a set number of years before returning it can you then put the full monthly payment as an expense in the P&L or can you only ever claim the interest in each monthly payment as an expense? If you can only claim the interest what would you do when you returned the car, would that count as selling your asset with the entire NBV as a loss?

Any thoughts to clear my confusion gratefully received 

  • Student
  • 2 posts
  • # 117890

Smiles said:

I’m a bit confused by the bookkeeping for the myriad of car financing that is out there. I’ve done the typical google search and there are such differing opinions on how to process a PCP agreement, some say treat as hire purchase, with a loan account, others as a lease. These two seem to have very different consequences on the amount that can be offset against tax as an expense. If there is no intention of making the final balloon payment and you were just using the PCP effectively to hire the car for a set number of years before returning it can you then put the full monthly payment as an expense in the P&L or can you only ever claim the interest in each monthly payment as an expense? If you can only claim the interest what would you do when you returned the car, would that count as selling your asset with the entire NBV as a loss?

Any thoughts to clear my confusion gratefully received 


 Hi Is car purchased on finance to use or simply hire for daily use ?

  • Student
  • 2 posts
  • # 117905

The car is on finance to use but with PCP if you don’t make the final balloon payment you give the car back and so you don’t have the asset so it’s sort of like hiring a car rather than purchasing. But not sure how this would work in the accounts


 Hi Is car purchased on finance to use or simply hire for daily use ?


 

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