Sales of Assets & Credit Charges: Codes 4200 & 4400

These two codes both sit in Sales but cover income that's out of the ordinary — money from selling something the business owned rather than made, and charges levied on customers who pay late.

The codes, and what each one holds

Code 4200 — Sales of Assets records proceeds from selling a fixed asset the business no longer needs, such as an old van or piece of equipment — distinct from ordinary trading income.

Code 4400 — Credit Charges (Late Payments) records interest or fixed charges levied on customers who pay their invoices late, as permitted under late payment legislation or the business's own terms. Both are Sales codes and normally carry a credit balance.

Real-world examples across industries

Haulage and logistics

A haulage company routinely sells vehicles once they're due for replacement. Because VAT was reclaimed on the vehicle's original purchase, VAT must be charged on the sale — a lorry sold for £14,400 (£12,000 net) posts as a debit of £14,400 to 1100 (Debtors Control Account), a credit of £12,000 to 4200 (Sales of Assets), and a credit of £2,400 to 2200 (Sales Tax Control Account). The same company also charges a persistently late-paying customer £58 in statutory interest and fixed compensation under the Late Payment of Commercial Debts (Interest) Act 1998 — a debit of £58 to 1100 and a credit of £58 to 4400 (Credit Charges (Late Payments)), with no VAT, since it's compensation for a loss rather than consideration for a supply.

Manufacturing and wholesale

A manufacturer sells an old piece of production machinery it's replaced, invoiced at £3,600 (£3,000 net) with VAT charged in the usual way: a debit of £3,600 to 1100, a credit of £3,000 to 4200, and a credit of £600 to 2200 — the real profit or loss on disposal depends on the machine's net book value in the fixed asset register, not just the £3,000 sale price. The same business also charges trade customers the fixed £40 to £100 statutory compensation fee for badly overdue invoices, plus accrued interest: a £58 charge on one persistently late account is a debit of £58 to 1100 and a credit of £58 to 4400, again with no VAT.

Freelance and small owner-managed business

A freelancer selling an old laptop no longer needed for work posts a small, one-off gain to 4200: £480 received, with no VAT charged since the freelancer is below the VAT registration threshold, is simply a debit of £480 to bank and a credit of £480 to 4200. Statutory late payment charges are rarely applied in practice at this scale — chasing a small, recurring client for compensation on top of a late invoice risks the relationship more than it's worth — so 4400 often sits unused in the chart of accounts for freelancers and small agencies, only posted to on the rare occasion a persistently late client gets charged the flat £40 compensation fee.

Why this matters day to day

Mixing asset disposal proceeds into ordinary trading sales would overstate genuine turnover and distort gross margin, since selling a used van isn't part of the core business activity. Keeping late payment charges in their own code likewise means the business can see clearly how much it's recovering from slow-paying customers, without that figure getting lost inside regular sales income.