Processing Government Grants for Electric Vehicles

When handling government grants for electric vehicles in car sales and purchases, it’s important to follow the proper process to ensure accurate financial reporting. Below is a guide for correctly processing government grants in both scenarios.

Car Sales

1. Build Government Grants as a Receipt Subsidy

• Do not treat government grants as factory or dealer options. Instead, they should be built as a receipt subsidy to ensure they appear "below the line" on invoices.

2. Zero-Value Factory Options

• Ensure that any factory options are set to zero value since you can only apply discounts to the vehicle price itself, not to factory options. This prevents any distortion of discounts, which could impact the grant calculations.

3. Calculate the Grant Application Amount

• The grant application should be based on the vehicle's base price minus any discounts (e.g., fleet, friends and family, or Motability discounts).
• Do not factor in factory option discounts, as this could affect your grant eligibility.

4. Finance Adjustments (If Applicable)

• If the vehicle is on finance, adjust the Amount to Add to PX field to accommodate any supplementary invoices. This ensures the correct finance value appears on the main invoice.
• Ensure the receipt subsidy is included in this box to reflect the grant properly in the financials.

5. Add the Grant Reference

• Add the Grant Reference (e.g., PIGC-012-033) as an accessory with a zero value on the invoice.

Car Purchase

1. Grants Paid as Separate Credits (Standard Process)

• If the manufacturer pays the grant as a separate credit, process it by posting a payment receipt on the stock card and direct it to the bank. This is straightforward.

2. Grants Deducted from Purchase Invoice (More Complex)

• Some manufacturers may deduct the grant amount (e.g., £5000) from the vehicle's purchase invoice. In this case:
  • Post the full purchase invoice (e.g., £15,000) before the £5000 deduction. The £5000 grant is considered a contra payment, not a discount.
  • This keeps the VAT and profit/loss calculations correct.

3. Posting the Payment and Deductions

• After posting the full purchase invoice:
  • Post a receipt payment on the vehicle stock card and allocate it to the cheque option, ensuring it hits Nominal 1.30.60.0 (New Vehicle Banking Nominal).
  • Then, post a Nominal to Purchase Ledger Journal to the same purchase ledger account where the vehicle purchase invoice was posted.
  • Finally, post the payment amount that was deducted from the bank (e.g., £10,000 after the £5000 grant is deducted).

4. Balancing the Purchase Ledger Account

• The 3 entries (purchase invoice, receipt, and payment) will balance correctly on the Purchase Ledger Account.