Summary
How to record the lease, maintenance and VAT charges of a hire car in Sage Accounting.
Description
If a business leases a car for business use then HMRC rules dictate that normally only 50% of the VAT on the hire charge is recoverable.
Resolution
Record the invoice
In this example, the company has received the latest invoice for the lease hire of a car. The invoice shows charges of £1,000 plus VAT for the hire and £100 plus VAT for repair and maintenance costs. Only 50% of the lease hire VAT is recoverable, whilst all of the VAT for repair and maintenance is recoverable.Record the invoice as an Other Payment as shown in the below steps and table:
- Go to Banking and click the relevant bank account.
- Select New Entry and from the drop-down list choose Purchase/Payment.
- Select the Other Payment tab and add the below details:
Ledger Account Details Net VAT Rate VAT 5000 – Cost of sales – goods Lease Hire Charge 1000.00 Standard 20% 100.00 5000 – Cost of sales – goods Non-recoverable VAT (50%) 100.00 No VAT 0.00 7302 – Equipment hire and rental Repair and maintenance 100.00 Standard 20% 20.00 
NOTE: The VAT amount will automatically calculate when you enter the Net Lease Hire Charge, based on the VAT rate selected. Select the VAT box to amend the VAT amount for the row. - Select Save.
Useful information
For further information about motoring expenses and VAT, please refer to HMRC's Public Notice 700/64 – Motoring Expenses (opens in a new tab).
For further information about recording the purchase of fixed assets including hire purchase, see Purchase a fixed asset.
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