Thank you for responding - happy to elaborate.
With most Finance functions the maintenance of the company car fleet is an onerous process due to the number of different items that need to be reported upon.
1)Background
-Invoicing arrangements with the company leasing the vehicle to us
Vehicles get leased for a period of time - typically three years.
When invoicing you get invoiced for the “finance” and “maintenance” elements.
The first invoice from the leasing company will be issued at the time of entering into the lease and will typically relate to three months of the lease. Thereafter they invoice monthly (in advance) for a month i.e. throughout the lease you are typically have three to four months of prepayments.
In the last three months of the lease they typically do not invoice as they invoiced three months at the beginning of the lease.
- In addition to leasing vehicles we also own vehicles outright.
These invoices are invoiced at purchases and administered via the Fixed Asset function in D365.
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2) Invoice processing of leased vehicles
We would normally process the invoices via our Purchase Ledger. When doing so the Input VAT (Value Added Tax) associated with the “finance element” has to be restricted by 50%.
Some suppliers will issue one invoice with multiple tax points. Eg. on the 31/12/2019 they issue an invoice with twelve tax points for the year (01/01/2020, 01/02/2020, 01/03/2020….01/12/2020.
There is not necessarily one vehicle per invoice. Typically there are many vehicles on an invoice all with different lease dates.
Currently
The only analysis the Purchase Ledger does is to split the Net and VAT correctly (allowing for the 50% restriction of VAT). The Net element posted to the Balance Sheet which the Management Accounts team then has to break out and analyse one vehicle at a time to report the correct P&L amount for the period.
If the supplier provides one invoice for the year we have to set a reminder to process the next tax point once we reach that date (current limitation of existing system is that you cannot post into the future due to reporting around VAT).
Ideally (within D365 or using an ad-on software)
-Is there any way of capturing greater information at the point of processing the Purchase Invoice which would allow D365 to understand the periods the invoice relates to? E.g. post to a control account and then set up an automatic journal to release from the Balance Sheet to the Profit and Loss in the relevant month.
-At the end of each month I would like to see a Balance Sheet Reconciliation and Profit and Loss reconciliation which shows accruals/prepayment (Balance Sheet) or expense (Profit & Loss) by car. The P&L reconciliation would then be used for Corporation Tax purposes as well as analysis of costs.
-If the employee has had “extras” fitted to the car then you would look to recharge them via the payroll.
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3)VAT and Fuel Scale Charge
As mentioned above we need to restrict the Input VAT relating to the Finance Element, as the vehicles typically have a private use. I am assuming this is best done at the point of posting the Purchase Invoice (discussed in (2) above).
If you make vehicles available for private use then you have to pay VAT associated with Fuel Scale charge. This is done by charging the company i.e. adjusting the Output Tax on the VAT return and charging the P&L account. This charge is calculated in line with published HMRC rates (based on fuel type and CO2 rating).
This is further compounded if the vehicle is not used for a period of time.
Ideally
We would like to automate the reporting of Fuel Scale Charge for any vehicle on the fleet which has a Private Use associated with in. To to this we would need to track both leased and owned vehicles and who they are assigned to.
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4)Benefit in Kind (P11D)
Typically company cars are made available to employees and are treated as a “Benefit in Kind” and have to be taxed. This tax is administered by reporting the “Benefit In Kind” to HMRC via the form P11D once a year. Information required is car model, engine size, fuel type, CO2 and value.
Within the year if you make a company vehicle available to an employee or withdraw one from an employee then we are required to also report this to HMRC within the year. This is done on form P46.
Ideally
We would like to automate the reporting of P11D and P46 based upon the vehicles we have (leased or owned) and assigned to employees.
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5)Maintenance of vehicle
Not a finance function but there are wider items you need to track about the vehicle – such as due date of Road Tax and MOTs.
