Bookkeeping for the self-employed car mechanic: parts, cash and the margin scheme

Cash: your till is a daily record, not a drawer

If clients pay at the counter, you must keep a cash book in which every receipt and payment appears by date, with the resulting balance below it. That balance may never be negative: it is the first thing checked in an audit, because you cannot spend money you do not have. So count the till weekly for real and book the difference as a cash discrepancy instead of smoothing it away. Everything about it is covered in cash records.

Give every client a receipt, even for a small repair. Below € 100 including VAT that may be a simplified invoice; above it you add the full invoice details, see simplified invoice or till receipt. Use consecutive numbers so there are no gaps in your series; see invoice numbering. If you take money from the till for yourself, book it as a private withdrawal and not as a cost, see private withdrawals and deposits.

Parts: new, used and from a private individual

Parts you buy from the wholesaler are ordinary purchases: deduct the VAT, pass them on with a margin, charge VAT. Make sure the invoice is in your business name, because an anonymous receipt above € 100 including VAT gives no right to deduct, see purchase invoices and VAT deduction.

If you buy a used part or a scrap car from a private individual, you get no invoice and therefore no deductible VAT. Draw up a purchase statement yourself with the date, description, registration or part number, amount, and the seller's name and address. Without that paper you have an expense without evidence and your cost disappears in an audit. See buying from private individuals.

If you resell such a used part or car, you can use the margin scheme: you then charge VAT only on your profit margin instead of on the full selling price. You may not state VAT on the invoice. How the margin records work and when the globalisation method is easier is covered in the margin scheme for used goods.

Workshop, lift and tools

If you rent a unit, the rent, energy and insurance are fully deductible, see renting business premises. If you work in a workshop at your own home, the strict rules for a home workspace apply: usually it is only deductible if the space has its own entrance and its own facilities.

A vehicle lift, diagnostic equipment, a tyre changer and your tool trolley easily exceed € 2,900 a year together, which entitles you to the investment deduction. Above € 450 each you capitalise and depreciate, see capitalise or deduct at once. Small tools, cleaning products, oil and disposal charges go straight to costs.

If you keep a courtesy car for clients, it is a business asset with all costs deductible. If you also use that car privately, you face an addition to income and a VAT correction for private use, see private use of a car and VAT. If you later sell your business car, you settle up on the book profit, see selling a business car.

Quotes, extra work and clients who do not pay

With repairs the amount often grows during the work: you open something up and find more damage. Call the client and record their approval in a message or email before you continue. Without that record you are weak if they dispute the bill afterwards, and that is exactly where repairs go wrong. See agreeing and invoicing extra work.

If a client stays away without paying while their car is still with you, as a repairer you have a right of retention: you may keep the car until the bill is settled. Record that and your payment term in your terms and conditions. If they never pay, you can reclaim the VAT you paid on that invoice once the debt is uncollectible, see uncollectible invoices and VAT and when a client does not pay.

Frequently asked questions