PPCs Accounts

AltheHibby

I have just been working on my wife's accounts for her when a thought struck.

As has been proven on here on many occasions, the invoices are non-enforcable. Therefore, if a PPC submits its accounts to Companies House, showing the outstanding tickets as debtors, it must surely be overstating its worth by showing 'non-debts' as debtors and presenting misleading accounts is an offence. Also, any accountant who okayed these accounts would similarly be guilty of an offence.

Any thoughts on my logic? Is it sound or barking mad?

ManxRed

I'm pretty sure this has been raised before on PePiPoo.

Can't remember who by or what the outcome was, but you are not alone in your thinking.

bargepole

All companies do (or should) have a provision in their accounts for writing off bad debts, usually around 3%.

In the case of PPCs, that figure should be closer to 30%, and rising.

antrobus

As I understand it, PPCs run their businesses on the basis that only a percentage of people ever pay up and the rest they forget about. So I'd guess that in their accounts, they simply write-off any invoice that was issued more than x months ago, and then whack through a provision at the year end to cover the outstanding invoices.

Or to put it another way. If you looked at a PPC's balance sheet and saw that it showed £100,000 as a debtor in respect of outstanding tickets, it's likely that figure is made up of £200,000 worth of tickets less a £100,000 provision for tickets that won't be paid. So long as that net figure of £100,000 is a realisitic estimate of the amount of cash they will receive, then their accounts will show a true and fair view and everybody will be happy.

HO87

I think Althehibby's point is actually based on an assessment of the PPC business model as a whole as opposed to the specifics of how they account for bad debt. His point, I believe, is that as their charges are arguably unenforceable how can those unpaid invoices be classed as debts when, at law they are strictly 'non-debts'. A subtle difference but a difference nevertheless.

Correct me if I'm wrong.

ManxRed

That's how I took it too.

They're not 'debts' until a judge says they are. Which will never happen.

Although they are technically unpaid invoices I guess.

antrobus

HO87 wrote: »

I think Althehibby's point is actually based on an assessment of the PPC business model as a whole as opposed to the specifics of how they account for bad debt. His point, I believe, is that as their charges are arguably unenforceable how can those unpaid invoices be classed as debts when, at law they are strictly 'non-debts'. A subtle difference but a difference nevertheless.

Correct me if I'm wrong.

Fortunately it's the kind of 'subtle difference' that has no relevance whatsover for accountants. The accruals concept demands that if the work has been completed then the billable amount should be included as a debtor, and HMRC demands that accounts are prepared on the basis of the accruals concept.

Quite why anybody thinks it would be a good idea to force PPCs to adopt cash accounting I don't know. I'm sure that PPCs would love to be allowed to exclude the value of outstanding tickets from their accounts and defer the payment of the tax due to some other time.

AlexisV

You're going to have more success looking at the VAT avoidance.

An invoice is an invoice at the end of the day. Any company can issue invoices for any amount, it's just that few other industries issue invoices that are above the agreed cost and most recipients pay without question.

AltheHibby

HO87/Manx, that's how I meant it. If these invoices have no legal backing to their attempted collection then the accounts can't be "true and fair".

Antrobus, I am an accountant and that's why the thought struck me. If I were an auditor for a PPC I could not accept these invoices being accrued as I know they are not legitimate debts. I am not suggesting cash accounting for a second.

AlexisV, and that's why they are successful despite the lack of legal backing for the invoices.

Thanks to all who replied.

taffy056

I know this is not strictly the question, but if they are claiming for their losses, how then do they make a profit ? Surely any money coming in would be to cover the losses they incur?

In reality I know it's a scam and the money claimed is in far in excess of any alleged loss, but thought it was a good question to ask.

bazster

But HMRC vs. VCS completely changes the accounting picture for both the PPC and the landowner.

The UTT ruled, very clearly and simply, as follows:

The legal analysis is that VCS collects the various parking charges as agent for the client, which represents damages for trespass, or for breach of a contract between the landowner and the motorist. Such payments are outside the scope of VAT.

By allowing VCS to collect and retain the charges, the client was giving consideration, or further consideration, to VCS for its parking control services under the contract. That was consideration for standard-rated supplies by VCS to the client.

In other words, the money the PPC collects from its victims is actually the landowner's money. And where the PPC retains that money it is in reality a payment from the landowner to the PPC.

So, the extent to which the PPC has bad debts depends on its relationship with the landowner, which could be tricky to figure out because you can bet that none of this is actually covered in the contracts the PPCs have with the landowners.

Of much more interest though is the potential effect of this on the landowners' accounts. Clearly all monies extorted by the PPC should be passing through the landowners' books - which they certainly will not be doing right now! In fact, I bet there are very few landowners who have any idea of how much money the PPC is extorting - but they're gonna have to find out!

Furthermore, wherever an invoicee cannot/will not pay, it is the landowner who holds the bad debt; obviously this too needs to be reflected in the landowners' accounts.

The more you look at HMRC vs VCS, the more unpleasant implications surface for the many landowners who have been stupid enough to get themselves into bed with sharks.

I can feel some letters coming on...