Purchasing your hotel, guest house, restaurant or pub is an exciting time but one which can often involve a steep learning curve. A little information follows but be aware that all purchases are different so it’s crucial that you get the advice specifically relevant to yours from the off.
Business Planning
The first thing you should do prior to purchasing a business is a business plan. Have you asked the right questions and understood the business’s historic accounts? Do you know what annual profits you can expect? Have you looked into preparing a cash flow forecast to make sure the business profits can support your lifestyle and business lending level as well as support the seasonally low points of the business?
Business Setup & Tax Relief
Have you considered how you will run the business (partnership, sole trader, company)? People often have ideas that don’t marry up with obtaining the best tax relief and structure. It is vital that you get your business setup in the structure to suit.
One of the first questions to ask when purchasing a business is how long the seller has owned the property and whether they have put forward any initial indication of division of the value between goodwill, property, furniture and fittings and integral features. Obtaining a beneficial apportionment for these categories and making sure that all the right capital allowances have been claimed before the sale completes can give thousands of pounds of tax relief, if structured correctly.
Choice of year end can also have a big impact on potential tax relief, especially if you are making improvements to the property.
As a buyer you need to be advised on this early. It is a very complicated area, and one which has gone through changes in recent years, meaning that both buyers and sellers could miss out on tax relief – and there is no better position as a buyer than being able to save both you and the seller some tax.
VAT
Have you considered whether the business should be VAT registered? VAT can have a significant impact and it is important to understand if the previous business was VAT registered, and how trade levels sit in comparison to the VAT threshold (currently £85,000). If the business turnover level is going to exceed the VAT threshold, then it may also be worth considering VAT flat scheme where applicable.
Bookkeeping
Once you are in you need to consider your bookkeeping moving forward. You need to have a bookkeeping system set up to make sure you record your business transactions in a way that complies with HMRC requirements, but also allows us (and more importantly you) to monitor your business as you go in real time. There are many options, but the key is getting it to work for you.
Staff
If you require some additional help from staff once you are in, then there is a bit more to consider other than just paying them an hourly rate. Have you considered employers’ pension contributions and employers’ national insurance? Are you retaining any staff from the previous business owners?
In order to adhere to your responsibilities to HMRC you will need to setup a payroll scheme for your business to be able to pay your staff as well as complying with your auto-enrolment pensions responsibilities.
At Dodd & Co we have specialists in every field that can help you with all of this and a whole lot more.
Click here to read other Tourism Newsletter articles.
