Frs cycle to work freeagent

[Archangel]

Freeagent calculates my company's vat liability slightly incorrectly, this is because we have a salary sacrifice in place for a cycle to work scheme and the sacrifice is liable for vat.

Could anyone tell me which nominal accounts to credit/debit to correct the figures?

I think I need to increase "819 vat charged" account, but which account do I decrease?

Thanks

[AJ1982]

Correct me if I am wrong, but I think Free Agent can handle salary sacrifice schemes, nothing I have done myself, but a quick Google showed me the way.

[Archangel]

Correct me if I am wrong, but I think Free Agent can handle salary sacrifice schemes, nothing I have done myself, but a quick Google showed me the way.

It handles it in that it deducts the sacrifice from salary if yiou use the freeagent payroll (which I don't), but doesnt actually do anything with the VAT side of the salary sacrifice

[AJ1982]

It handles it in that it deducts the sacrifice from salary if yiou use the freeagent payroll (which I don't), but doesnt actually do anything with the VAT side of the salary sacrifice

Possibly I am confused, I am not sure why VAT is related to salary sacrifice...

The item is purchased from a 3rd party company, invoiced to YourCo, with VAT. This purchase is recorded on your company outgoings with VAT.

The salary sacrifice is deducted, presumably as a loan to employee. So a £600 bike would be deducted £50 pcm.

[AJ1982]

Maybe I am wrong... just found this...

Cycle 2 Work Scheme - how to account on Freeagent

Might be a "what does your accountant" say job

[TheCyclingProgrammer]

Maybe I am wrong... just found this...

Cycle 2 Work Scheme - how to account on Freeagent

Might be a "what does your accountant" say job

If I understand this right...YourCo buys the bike and then effectively hires it out to the employee - the hiring costs are paid for by the salary sacrifice but the hire cost is treated as a taxable supply by YourCo to the employee. So it needs to be included in your flat-rate turnover for VAT purposes?

I do think this is an ask your accountant question, but if my above understanding is correct, then possibly you could:

* Deal with the salary sacrifice by simply reducing the amount you pay the employee and run through the payroll
* Create sales using journals to account for the taxable supply - this should add it to your VAT return turnover

[Jennie Stamp]

Freeagent calculates my company's vat liability slightly incorrectly, this is because we have a salary sacrifice in place for a cycle to work scheme and the sacrifice is liable for vat.

Could anyone tell me which nominal accounts to credit/debit to correct the figures?

I think I need to increase "819 vat charged" account, but which account do I decrease?

Thanks

Hi, have you spoken to the FreeAgent support team ([email protected]) about this?

Thanks,

Jennie

[Archangel]

Hi, have you spoken to the FreeAgent support team ([email protected]) about this?

Thanks,

Jennie

Yes, their less than helpful response was "ask your accountant"

[Archangel]

If I understand this right...YourCo buys the bike and then effectively hires it out to the employee - the hiring costs are paid for by the salary sacrifice but the hire cost is treated as a taxable supply by YourCo to the employee. So it needs to be included in your flat-rate turnover for VAT purposes?

I do think this is an ask your accountant question, but if my above understanding is correct, then possibly you could:

* Deal with the salary sacrifice by simply reducing the amount you pay the employee and run through the payroll
* Create sales using journals to account for the taxable supply - this should add it to your VAT return turnover

In a nutshell.

1) yes the employees salary is just reduced by the amount of the "loan"
2) if I create sales then these are liable to corporation tax, the purchase of a bike is an allowable expense, but is liable to vat. (I'm sorry I started this cycle to work scheme, but one of my employees was keen)

I might just bite the bullet and lose the ct on the purchase, but why should I take a 20% hit to "do the right thing"?