Scrappage Guidance Notes
25/08/2009
Accounting for the scrappage scheme
Set out below are notes in respect of accounting and related VAT treatment for
vehicles sold under the scrappage scheme.
Invoicing and VAT treatment
Amounts received under the scrappage scheme should not affect the VAT amount
due on the vehicle being sold.
The amount should be shown after the gross value of the vehicle, like a deposit, as a
receipt of funds. This must be split into two amounts; the amount due from the
government and the amount due from the manufacturer.
The amount receivable will then be included in a scrappage ledger account awaiting
receipt from the manufacturer.
Accounting and composite submissions
Following the above treatment, the vehicle sales value should be recorded inclusive
of the scrappage receipt of £2,000. For example, if the vehicle is sold for £7,995
comprising of £5,995 from the customer and £2,000 from the manufacturer /
government then the gross sales value would be £7,995 inc VAT. The vehicle cost of
sale will be unaffected by the scrappage receipt.
However, if the manufacturer contributes additional amounts over and above the
£2,000 then the excess should be recorded as a discount from the cost of sale. For
example, the vehicle is sold for £14,995 comprising of £11,995 from the customer
and £3000 from the manufacturer / government. In this case, the sales value would
be £13,995 (inc vat) with the £1,000 (inc VAT) excess manufacturer receipt being
recorded to the cost of vehicle sales / input vat.
Treatment of receipts from scrap dealers
If you are lucky enough to be paid by a scrap dealer for the vehicle then this is a
vatable supply, even though in most cases no invoice will be provided.
There is no consensus on how this should be done, though there are two main ways,
1) A list of all receipts should be kept and a manual adjustment performed to the
VAT return to pay over the correct amount of VAT.
Scrappage
Guidance Notes
2) The vehicle being scrapped should be included in stock with a nil value and
set up as a non-qualifying vehicle. When passed to the scrap dealer an
invoice would be raised for the amount received. The DMS should then
automatically calculate the correct amount of VAT, though your reporting of
trade vehicles will be affected.
Documentation to be retained
The following documents need to be retained for inspection until at least 7 July 2017!
1) A copy of the V5 for the vehicle being scrapped.
2) A copy of the MOT or hackney carriage licence for the vehicle being scrapped
3) A copy of the invoice for the new vehicle showing the scrappage allowance as
a specific deduction.
4) Details of the new vehicle including registration number and VIN.
5) A copy of the certificate of destruction for the scrapped vehicle.
6) Customer data protection and vehicle disposal agreement.
The above are the minimum required.
However, it may be worth including (just in
case):
1) Proof of customers ID
2) Copy of car tax certificate on old vehicle
3) Hire purchase check on old vehicle
4) Customers insurance details.
For further information or advice please contact Paul Daly on 0161 493 1930