How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask bigduckontax Your Own Question

bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3607
Experience:  FCCA FCMA CGMA ACIS
75394688
Type Your Tax Question Here...
bigduckontax is online now

My wife and I run a small catering business (Ltd Co), turnover

Customer Question

Hi. My wife and I run a small catering business (Ltd Co), turnover circa £70k and my wife takes around £2000 from the business annually, it has been running for 3 years. I am employed in a full time job, and work in the business at weekends only, and take a nominal salary for this time. We are currently in negotiation to buy another existing catering business in our town, which will provide us with a shop front premises, and additional catering facilities, and provide an additional day to day sales outlet and further income. Although we are buying the business we will change it's format slightly, currently a cafe, we will turn this into more of a tea room. We would like to run the additional business as part of the existing one, as it is an afternoon tea business, thereby having a single set of accounts, is this route acceptable? Secondly, we have been asked about the apportionment of the business sale price. The vendors have stated £30,000 for fixtures and fittings, ovens, freezers, fridges etc, £18000 for the assignment of the lease and £1 for the goodwill. Is this the most tax beneficial split for the business purchase costs, or should we ask that this is apportioned differently?
Many thanks for your help.
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.
The first thing that you must remember about buying unquoted businesses is that they are only worth what someone is prepared to pay for them. If you consider 48K acceptable, well so be it.
The 30K for equipment etc will count as plant and machinery, be entitled to Annual Investment Allowance (AIA) and will be written off through the capital allowance system on acquisition. Leases do not come under the capital allowance regime at all, but under revised rules are tax deductible. The goodwill we can forget about, it is too small to adjust. Effectively the whole lot (48K) can be written off against Corporation Tax (CT) in the purchase year so effectively the answer to your question is the proverbial lemon. CT is currently at 20% on net profits. One small point, the assignmant of the lease may well attract Stamp Duty Land Tax (SDLT) which you should take into account.
One thing you should watch out for, however, in the revised enterprise is VAT. You company is getting dangerously close to the VAT Threshold, currently 82K, and the new venture may well breach this. You would probably have to register and adjust your sales prices accordingly to account for the 20% tax which VAT imposes quarterly. However, on the other side of the coin, is the ability to reclaim any input tax suffered on items bought through the business. Please remember that a limited company may only remunerate its directors, who are deemed to be employees, through PAYE, but if monthly emoluments do not exceed GBP 486 in any one month then there is no need to use the monthly reporting system (RTI) and the payments need only be declared on line at the end of the tax year.
I am at a total loss as to why your accountant should need to know about your personal tax affairs if it is your company taking the acquisition as you indicate from the tenor of your question.
I do hope that I have been able to shed a little light on your position.
Customer: replied 1 year ago.
Many thanks, ***** ***** a little disappointed with our accountants attitude, and I am not 100% sure about the present company turnover, as my wife deals with 99% of the company trading, but she needs advice on the new enterprise, hence my additional involvement. No doubt the dual 'companies' will exceed the £82k threshold as a given, so hopefully she has already taken that into account. As you say the entire £48k can be written off against CT, does that mean in essence it doesn't matter how the values are apportioned in our case?Many thanks and kind regardsSteve
Expert:  bigduckontax replied 1 year ago.
Well I checked with Deloittes on the treatment of leasehold premiums so just to be on the safe side it might be good idea to inflate the 'plant and machinery' element at the expense of the lease charges on assignment. I mentioned SDLT, but actually at the prices being bandied about this will be nil anyway. Just thought you might like to know.
Please be so kind as to rate me before you leave the Just Answer site.
Customer: replied 1 year ago.
Mnay thanksI will besure to rate, it has been very helpfulMany thanksSteve
Expert:  bigduckontax replied 1 year ago.
Delighted to have been of assistance, Steve.
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3607
Experience: FCCA FCMA CGMA ACIS
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 1 year ago.
Thank you for your excellent support.
The best of luck in your new venture.
Customer: replied 1 year ago.
Many thanks, ***** ***** question, which I hope is not cheeky! Is it advisable/possible to combine the two businesses under the same accounting umbrella to reduce the bookkeeping workload? The businesses, although slightly different, will both operate under the same auspices, one an outside catering 'offshoot' of the other permanent location tea room. My wife would like to run them as the same business from an accounting point of view, is there any reason she shouldn't do that?many thanks
Expert:  bigduckontax replied 1 year ago.
None at all, I think it is an excellent idea and easier to manage.
Customer: replied 1 year ago.
Perfect. Many thanks for your help.Kind regardsSteve
Expert:  bigduckontax replied 1 year ago.
Not at all, Steve.

What Customers are Saying:

 
 
 
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
< Previous | Next >
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP
  • I couldn't be more satisfied! This is the site I will always come to when I need a second opinion. Justin
  • Just let me say that this encounter has been entirely professional and most helpful. I liked that I could ask additional questions and get answered in a very short turn around. Esther
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex
 
 
 

Meet The Experts:

 
 
 
  • Sam

    Sam

    Accountant

    Satisfied Customers:

    7088
    26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
< Previous | Next >
  • http://ww2.justanswer.co.uk/uploads/TA/Tax Expert/2013-8-21_231010_sam.64x64.jpg Sam's Avatar

    Sam

    Accountant

    Satisfied Customers:

    7088
    26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
  • http://ww2.justanswer.co.uk/uploads/BI/bigduckontax/2013-8-12_222058_1.64x64.jpg bigduckontax's Avatar

    bigduckontax

    Accountant

    Satisfied Customers:

    2333
    FCCA FCMA CGMA ACIS
  • http://ww2.justanswer.co.uk/uploads/TA/TaxRobin/2013-8-28_16186_femalebusinessprofessionalbinderhand11038485.64x64.jpg TaxRobin's Avatar

    TaxRobin

    Tax Consultant

    Satisfied Customers:

    524
    International tax
  • /img/opt/shirt.png taxadvisor.uk's Avatar

    taxadvisor.uk

    Chartered Certified Accountant

    Satisfied Customers:

    2845
    FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
  • http://ww2.justanswer.co.uk/uploads/MS/MsAM/2012-6-9_16426_anna.64x64.jpeg Anna's Avatar

    Anna

    Teacher, writer, biologist

    Satisfied Customers:

    270
    Great research skills, variety of work experiences, teaching experience.
  • http://ww2.justanswer.co.uk/uploads/PD/pdheslin/2012-6-6_232056_pambig.64x64.jpg pdheslin's Avatar

    pdheslin

    Consultant

    Satisfied Customers:

    51
    20+ years of internet site creation and search engine optimization. Dozens of search tools at my disposal.
 
 
 

Related Tax Questions