No AC insurance and settlement of post-accident repair of the company's car

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When running a business, entrepreneurs often look for savings. Therefore, they resign from voluntary AC insurance and pay only the obligatory third party liability insurance for vehicles used in the company. What is the impact of the lack of AC insurance on the settlement of a post-accident repair of a company car? Let's check it out!

No AC insurance and tax deductible costs

Pursuant to Art. 23 sec. 1 point 48 of the PIT Act, expenses incurred by the entrepreneur as a result of:

  • loss or liquidation of cars,
  • accident repair of cars not covered by voluntary insurance (AC).

Due to the above, the lack of AC insurance for vehicles clearly excludes the possibility of including in the tax costs the expenses related to their post-accident repair. It is worth noting, however, that the costs incurred in connection with the current repairs of vehicles were not excluded from tax costs despite the lack of AC insurance. Therefore, it is important to identify the cause of the costs. If the vehicle is not covered by voluntary AC insurance, the invoices received for the accident repair of the car are not posted.

Received compensation and tax income in the absence of AC insurance

The lack of AC insurance affects the settlement of the received compensation. Due to the fact that the costs of an accident car repair are not tax costs, the compensation received from the insurer is not recognized as tax income. The taxable income, however, is the possible excess of the compensation paid over the costs of repair. This surplus should be included in column 8 KPiR - Other revenues.

The non-cash form of settlement of car repair costs does not affect the entrepreneur's income. The moment when the revenue from the received compensation arises depends on the date:

  • collection of money at the checkout of the insurance company,
  • receipt of a postal order,
  • money is credited to the insured's bank account,
  • receiving compensation by a car repair shop - in the case of cashless settlement.

Income from received compensation will arise on the date it is actually received, regardless of the date on which the insurer is awarded the compensation.

The confirmation of the above procedure is the individual interpretation issued by the Director of the Tax Chamber in Poznań on May 5, 2011, with reference number ILPB1 / 415-80 / 11-4 / AMN, where we read that (...) the costs of repairing the car were settled non-cash, i.e. the receivables related to its repair were transferred by the Insurance Company directly to the company performing its repair, it does not affect the issue of obtaining income by the Applicant. The person who insured the car and at the same time the insured was the Interested Party and the compensation was awarded to him. Thus, the issue of transferring funds for the repair directly to the repair company, and not the Applicant who would transfer them to this company, is only a technical solution that does not have any impact on the generation of income for the interested party. (...)

No AC insurance and the right to deduct VAT

As a rule, when we receive an invoice for an accident repair of a company car, the lack of AC insurance makes it impossible to include the expense in tax costs. However, the lack of AC insurance does not exclude the possibility of deducting VAT from the costs incurred. The entrepreneur must bear in mind the amount of the right to deduct VAT on expenses related to the vehicle.

In a situation where the taxpayer is entitled to a deduction of 50% of VAT, the insurance company, when paying the compensation, should cover the net amount of repair costs together with 50% of non-deductible VAT. If the taxpayer is entitled to a 100% deduction of VAT on expenses related to the vehicle, the value of the compensation will cover the net amount of the repair.The taxpayer benefiting from the VAT exemption does not settle VAT, therefore the insurer should pay the entire amount of the car repair in gross value.

Example 1.

Jan Kowalski, the owner of the XYZ company, was involved in a traffic accident in which a company truck was damaged, covered only by compulsory third party liability insurance and from which 100% VAT deduction is due. Mr. Jan received compensation in the amount of PLN 2,000 from the insurer. The cost of the post-accident repair of the vehicle is PLN 1,500 net and PLN 345 ​​VAT. How should Mr. Jan settle the compensation paid?

As a rule, taxable income arises when the compensation is received. The lack of AC insurance excludes the possibility of including in the tax costs the expenses incurred in connection with the accident repair of the car. Due to the fact that Mr. Jan deducts 100% of VAT from the expenses related to the use of the vehicle, he should show in column 8 KPiR - Other revenues the amount of PLN 500 (PLN 2,000 - PLN 1,500). However, as an active VAT taxpayer, Mr. Jan can enter the amount of PLN 345 ​​of VAT in the VAT register of purchases.

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Accident vehicle repair and no AC insurance - booking in the wFirma.pl system

In a situation where the entrepreneur benefits from VAT exemption, the amount of the excess of the received compensation over the cost of repairing the vehicle should be booked in the wFirma.pl system only in column 8 KPiR - Other revenues.

To do this, go to the tab: REVENUE »OTHER REVENUE» ADD OTHER REVENUE »OTHER REVENUE (DW). For the accounting scheme, select REMAINING REVENUE, and in the TOTAL field, enter only the amount of the excess paid compensation.

If the entrepreneur is entitled to a deduction of 50% VAT on expenses related to the vehicle, the lack of AC insurance does not exclude the possibility of deducting VAT from the costs incurred related to the accident repair of the car. In order to settle the received insurance, the entrepreneur should enter the excess amount in the books by generating internal evidence in accordance with the scheme described above. Additionally, 50% VAT can be deducted from invoices confirming the repair of the car. To do this, make direct entries in the VAT register through the tab: RECORDS »PURCHASE VAT REGISTER» ADD ENTRY. In the Net Value field, enter 50% of the net invoice amount.

In a situation where the taxpayer is entitled to deduct 100% VAT on car-related expenses, despite the lack of AC insurance, he has the option of including 100% of the input tax on the invoices for the accidental repair of the vehicle in the VAT purchase register. To do this, go to the tab: RECORDS »PURCHASE VAT REGISTER» ADD ENTRY. In the Net Value field, enter 100% of the net invoice amount. If 100% VAT is deducted, any excess of the compensation paid over the cost of car repair should be shown in other income by issuing an internal proof.