Has your business got the potential to be a Franchise?

This question has been asked by a number of clients in recent months, so I thought I would share with you some insights into what is required if you are looking into this.

Questions to ask yourself.

Does your business make a reasonable profit?

Do your products or services meet a ready need in the market?

Could your business work in other locations?

Could others be trained to run a business in the same way as yours?

Are you keen to grow but concerned about losing key personnel?

Does it interest you to help others become successful in their own right?

Are you keen to grow whilst minimising the risk?

Are you keen to grow whilst minimising financial outlay?

Would you like to multiply your profits over the next few years?

Would you like to generate a substantial passive income stream?

If you are saying yes to most of these questions, then your business could have franchise potential. We have the contacts to hand who can assist you through this important phase.

Some of which are:-

Having a sound financial model with excellent documented processes will put you on the right road to make your business a viable option for others. Most networks look at a business being able to run at a turnover of more than £1,000,000 a year, as this has proven that the model is working and that you as owners are seeing success in your own right. That doesn’t mean that as a smaller business that this idea is pie in the sky, but it does make a difference on your selling price and advertising potential of the franchise.

We have found that by being able to at the push of the button knowing exactly where you are financially, you can plan for any number of opportunities. The important thing to remember is that whilst you are passionate about your product or service, others will follow suit. Keeping the motivation is a big part of these successful brands. Training and recruitment, and controlled growth and support. It doesn’t matter what type of industry either, we have seen the food industry, manufacturing and accountancy to name a few take on the franchise idea and make a big success. It is a faster way of getting your name out and improving branding and enables you to distribute on a national, multi national scale, and of course profitable. If you would like to hear more, come and book an appointment with us.

This blog is intended for information purposes only advice from past experiences, you may have your own suggestions.  It is not intended to be used for all of your business decisions, but used as a guide only.

Happy with our work?

Our clients have been very loyal by giving us some superb references since we began trading.  In fact, a good proportion of our clients have come via the referral route.

So, it’s time for us to give something back.

Refer us to others for a £40 discount on this year’s fee

As an existing client, if you refer us on to someone who becomes a client directly as a result of your referral, we’ll give you £40 discount on your fees* for that same year.

Refer two clients who sign up with us – and you’ll get double the discount. Three clients and triple – so if you recommend others to us regularly, who knows – you may never have to pay one of our invoices again.

Just make sure that they tell us that you sent them!

To find out more call Nicola on 029 2065 3995 or email her asking for more information.

*at referral invoicing point.

Your year end can cost you more than you think

Preparing your year end accounts can be costly your business – and that’s before you’ve event considered the financial aspect.

In finding, organising and making sense of your paperwork and records, there are time costs, emotional costs (usually stress!) and work-life balance costs to consider.

15% off your year end with us

Cross Accounting Services can help on all fronts. We love year end and so as a thank you from us, we’re offering 15% off your first year end fees with us.

So, you get to spend time doing the things you love at a reduced all round cost – and we get to spend time doing the things we love, thanks to you!

Call Nicola on 029 2065 3995 and quote reference CA15 to receive your discount or email her asking for more information also quoting CA15 Closing date 31 March 2014

The Art Of Cashflow Management

Point 1

Always be aware of what you have in the bank Account

Point 2

Put together a short term cashflow 3 months and a longer term one 12 months

To put together the cashflow statement

Sales Income Put all you known sales turnover from your diary into the forecast Unknown your new sales turnover, use last years figures to guide you, in the absence of last year, use a realistic sales turnover.
Don’t forget VAT and keep it separate, as this money belong to the Inland Revenue
Other Income ie bank interest, dividend, insurance refunds.

Costs Cost of Sales this can be based on your average margin percentage

Overhead costs

Fixed and variable

Ie rent, heating, salaries, office costs
Bank loans and capital
The VAT return and Paye

Point 3

Update this daily or weekly, with actual figures, this will allow you to see in advance how your cash is being spent, and also if you need to fund the business. Or used for Capital expenditure and taking on staff. It’s a great predictor for being able to do operation things.

Point 4

If you see a dip in funds, make sure you know in plenty of time, as a six week window may not be able to be filled, whereas a 3 to 6 month window you can plan ahead, and build up cash funds to cover you over the slower time.

Point 5

Use other sources to save on cashflow Gain credit with suppliers Get your capital expenditure leased, or obtain a bank loan. This will also improve your credit score. You score goes up, when you are able to get credit.

Point 6

Keep this on track at all times, even when you are in a cash rich, situation. You might be wasting your money on low interest schemes. Look at saving in other areas.

Let it be used against bringing your tax bill down, investments in EIS schemes, Pension contributions.
Further investment that will give a better return. Capital expenditure. Website development.

Self Employment Vs Employed

I get asked questions about subcontractors on a regular basis, so I thought I would share a few tips with you.

Employed

You will need to register for PAYE all employed staff regardless of the number of hours they work for you.    You need to keep personal information for example.  Name, address, national insurance, date of birth, hours worked and start and finish dates.   Keep a personnel file of any discussions or grievances too.

All employees require an employment contract, this can be simply done see the business link website for a template.

Business Link Template

Or you can use a registered HR Company to prepare one for you.

It describes the employee job title, description, hours of pay.  Rights to holiday entitlement, grievance procedures and sick and maternity leave.  Confirmation of start date and a job description, along with company rules and procedures.

You as the employer allocate work as required and set the hours of work to that employee, these are likely to consistent.  They do not have the responsibility of hiring or dismissing your staff.

You will need to keep employment records and records of salary paid, and you are responsible for their national insurance and income tax contributions.  You will also pay Employers National insurance on top of their salary, after the tax free allowances are taken into account.   Normally applying to full time time or part time after earning gross pay of £625 per calendar month. 2012/13 rates.

Self Employed or Contractors

Self employed staff or sub contractors are normally used on a temporary basis, the hours can be sporadic, and they have other customers besides yourself.

They would either be set up as a Limited Company, ie they are the employees of that company  or your supplier.   Or set up for self assessment.   They have the right to take or refuse a contract offered to them.  They also have the right hire and dismiss their own staff.

They have no entitlement to holiday pay, or sick pay through yourselves, or minimum wage.  But will normally charge for work done at their agreed hourly or fixed term rates.

They will either invoice you for the contract or have a deduction made on their fee through the CIS scheme.

The CIS scheme is a fairly simple scheme where you are either the contractor or the subcontractor, the contractor will deduct and pay over 20% of the subcontractors gross pay for income tax.  The subcontractor is responsible for their own national insurance.   There is a monthly submission required to tell the Inland Revenue what deductions have been made, and payment may be required.

Subcontractors can claim any overpaid deductions against their self assessment return, once a year.

A point to be wary of, any sub contractor that works only for you, and for more than six months will automatically be classed as an employee, once this time has elapsed and you will be responsible for their tax and national insurance.

If in any doubt contact the Inland Revenue helpline on 0845 900 0444

There are many case law studies, where this issue has become cloudy, and the sub-contractor has won the case, been able to sue the customer for lost holiday pay, sickness pay allowances.   Don’t let that be you.

This blog is intended for information purposes only and is only advice from past experience, you may have other suggestions of your own.  It is not intended to be used to make all of your business decisions but as a guide only.

A couple of updates on the Budget released in July 2015

Please see a couple of articles with links to the website below.

Buy-to-let investments

The other major property-related changes in the Budget statement will affect “buy-to-let” investors in residential property (whether in the UK or overseas). Investors in commercial property are unaffected; as are investors in properties which meet the criteria to be treated as furnished holiday lettings. There are two separate changes.

Wear and Tear

The first change relates to the “Wear and Tear” allowance for furnished lettings. It applies to companies as well as to individual landlords (but not to furnished holiday lettings). At present, the costs of replacing furniture and fittings are not tax-deductible. Instead, a notional deduction is given for tax purposes equal to 10% of rents. HMRC seem to consider that in many cases this is over-generous and from April 2016, it is intended that the 10% deduction will be abolished and instead tax relief will be given for the actual costs of replacements. Note that this change does not affect tax relief for expenditure on routine repairs to the property, including furniture and fittings in it, which will continue, as now, to be tax-deductible in full.

Financing costs

The second change is in relation to “finance costs” such as mortgage interest, interest on loans to buy furnishings and fees incurred when taking out or repaying mortgages or loans. Starting from 6 April 2017 (and phased in over 4 years from then) tax relief for these costs will be restricted the basic rate of Income Tax. This restriction will apply to individuals (presumably including individual members of partnerships or LLPs) only. It will not affect companies, but the position of trusts is not yet clear. No Income Tax relief is of course in any event available for capital repayments of a mortgage or loan.

Instead of deducting finance costs from rents to arrive at taxable profits, landlords will instead receive relief in terms of tax by deducting an amount equal to tax at the basic rate on the finance costs from the tax otherwise chargeable on the profits. If the tax deduction for finance costs exceeds the tax otherwise payable on the profits the excess can be carried forward and used in subsequent years.

The change will be phased in so that for 2017/18 the new rule will apply to 25% of the finance costs (with the other 75% being deducted in computing taxable profits as now); for 2018/19 the restriction will apply to 50% of the finance costs; for 2019/20 to 75%; and from 6 April 2020, 100% of the finance costs will “disallowed” and dealt with under the new rule.

Although its impact is ameliorated by the delayed and phased introduction, this change will significantly change the economics of some buy-to-let portfolios. Since the change does not affect companies, one response may be to consider adopting a limited company structure. But there are many factors to consider in choosing the right structure, summarised in our recent briefing note and the position is further affected by the change from April 2016 of the way in which dividends are taxed, also announced in the Summer Budget. The tax credit attaching to a dividend will be abolished and dividends will be taxed as normal income albeit at special rates of tax (with exemption for the first £5,000 of dividends). Broadly, this will increase the effective rates of tax on

http://www.bkl.co.uk/resources-and-publications/budget-insights/summer-budget-2015/summer-2015-budget-effect-on-property-investors/

Small firms face another taxation shake-up

KEY POINTS

• The changes to dividend tax are the start of a process to reduce the tax advantages of incorporation.
• For existing companies dividends are still generally more tax efficient that salary, though the advantage are reducing.
IR 35 and personal service companies are back on the government’s agenda.
• The OTS has been asked to look again at the alignment of tax and NIC and at small company taxation generally.
• There will be much to talk about with clients – many of them could face significantly higher tax bills next year.

• Employed versus self-employed.
• Incorporated versus unincorporated.
• Dividend versus salary

Seeing the bigger picture

So what is happening? After a couple of days reflecting on the Budget announcements I am starting to see what I think are the overall themes, although many of the details need to be firmed up. I’m writing this in advance of the publication of the Finance Bill so what follows will need to be reviewed against the small print.

The most obvious change is in the taxation of dividends. From next year dividends will have no tax credit attached (thus removing the often confusing distinction between “gross” dividends and “net” dividends) and the amount received will be all that matters.

Dividends will be taxable at 7.5%, 32.5% and 38.1% respectively, depending on the marginal rate. As we will no longer have to take into account the grossed-up amount of the dividend in determining which rate band somebody falls into there are likely to be some odd results close to the rate band changes.

Those rates represent real increases in tax. The blow is, however, softened by the introduction of a £5,000 dividend allowance for all taxpayers. The assumption is that this will mean that an individual who receives total dividends in a year of £6,000 will be taxable on £1,000.

I did see some commentators suggest that it meant something different: that if the dividends were less than £5,000 no tax was paid, but once they got to £5,001 tax was paid on the whole amount.

I don’t think that that can be right but, until we see the legislation, we can’t be certain. I will assume in the rest of this article that the former reading is the right one.

What’s the objective?

Why has he done things this way? First, I believe that the £5,000 limit is all linked with digital tax accounts. Just as we saw earlier in the year with savings income, taking out small amounts from tax should reduce the compliance burden considerably.

A typical self-assessment taxpayer whose dividend and interest income are small should have little to enter onto his digital account (I say should because we don’t yet know the mechanics of all this).

Second, the changes will raise more tax from those few extremely wealthy people with massive dividend portfolios. But third, and this is the key change, it will directly affect small businesses.

The Budget Red Book is clear on this. It says at 1.189:

“These changes will also start to reduce the incentive to incorporate and remunerate through dividends rather than through wages to reduce tax liabilities. This will reduce the cost to the Exchequer of future tax motivated incorporation (TMI) by £500 million a year from 2019-20. The tax system will continue to encourage entrepreneurship and investment, including through lower rates of corporation tax.”

There are two limbs to this: incorporation and dividend versus salary. Let’s take them in reverse order. A low-salary, high-dividend route still looks to be more tax-efficient even after these changes. Everybody has a different way of doing the comparison.

I like to keep it simple and look at a basic rate taxpayer who has used up his personal allowance against salary and is looking to take another £10,000 out of his company.

This confirms that the dividend route is still more efficient. This is consistent with what is said in the Red Book with its reference to “start to reduce the incentive”. I can only read that as a very strong hint that dividend tax rates will eventually be ratcheted up to align salary and dividends.

The chancellor hasn’t done it by putting National Insurance on dividends – with all of the problems that would have caused elsewhere in the tax system – but the new dividend tax is in some ways a back door way of doing the same thing.

So, the message to clients is: expect to pay more tax next year. If, as a result, they question the chancellor’s triple-lock announcement about no increases in tax rates, this query might be passed to 11 Downing Street.

Tax-motivated incorporation

What about the other element – the tax-motivated incorporation? Many people incorporated their businesses at the time of the 0% corporation tax band and, to an extent, all actions taken since have been trying to close the stable door after the horse has bolted. But these new changes are intended to discourage individuals from incorporating purely to obtain a tax advantage.

The computations here are trickier because we do not yet know the National Insurance bands for next year and therefore complete precision is not yet possible.

But the tipping point at which incorporation starts to deliver significant tax systems has clearly gone up. It looks as if incorporation at earnings even as high as £30,000 will now deliver a very marginal benefit.

I think of it this in the following broad terms. The advantage of incorporation has been that much of the income could be received as a tax-free dividend. Of that £30,000, something like £20,000 could be taken as dividend (using the personal allowance to cover salary).

Next year that £20,000 will create additional tax of £1,125 (£15,000 x 7.5%). That is a significant increase whereas, broadly speaking, the self-employed will see little change. Additional tax at that level would make incorporation much less attractive.

In our heart of hearts we all know some taxpayers who could not cope with operating through a company. The additional hassle of dealing with benefits in kind, loans to participators and company returns is often a nightmare for them, and hence for advisers.

With the tax benefits of incorporating being reduced (and I expect them to be further reduced in the coming years) there is a lot to be said for them to remain as self-employed.

Other changes

The dividend tax was not the only small business measure. Personal service companies are back on the agenda.

There is not only the decision to withdraw the employment allowance for one-person companies, but yet another review of the IR35 provisions to “find a solution which protects the Exchequer and improves fairness in the system”.

So where does this leave us? As I have said many times over the years the system for taxing small businesses lacks any coherence.

What we have is the result of various strands of the tax system designed for different purposes all crashing together on the small businesses that are the lifeblood of the economy.

This creates complexity and administrative burdens. We need a system designed specifically for small businesses and which addresses the triangle of tensions outlined above.

http://www.taxation.co.uk/taxation/Articles/2015/07/13/333367/all-change

We’re in the full swing of the Summer Holidays, as a business owner this can be a very busy time if youre in the food and leisure industry, it can also be a quieter time as many owners see because everything appears to be put on hold when suppliers and customers take time off and are on holiday.

How does Summer affect you? I see many business owners not taking time away from their business and carrying on regardless. Its important to have time away to recharge the batteries and to re-evaluate where you are going with it.

A lot of my clients are small micros businesses who might not have an army of staff to take care of things whilst theyre away. Heres a few tips they’ve shared with me on how they still manage to run their business but still take some important r & r.

Plan the diary around their holiday, do the bigger more important jobs in the run up to the holiday then plan the next jobs to be in the diary when they return.

Take small breaks so time away isn’t too dramatic and they don’t face backlogs coming back. Ie a long weekend away a couple of times a year.

Use a subcontractor to keep things ticking over until they come back.

Those companies with staff, leave clear instructions on what is to be done whilst theyre away.

Others leave the mobile phone on in case of emergencies but limit their workload reduced over the time period.

Whatever your business please take that rest time, you will read time and time again, those owners who take time away and have the rest are far more likely to succeed, than someone who never takes time away.

Work life balance is important to keep in the mind, we all like to think of ourselves as workaholics, and fully committed. Our health and wellbeing, and feeling motivated and energised is important too.

This blog is intended for information purposes only and is only advice from past experience, you may have other suggestions of your own. It is not intended to be used to make all of your business decisions but as a guide only.