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

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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.
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 2 years 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
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 2 years ago.
Mnay thanksI will besure to rate, it has been very helpfulMany thanksSteve
Delighted to have been of assistance, Steve.
bigduckontax and other Tax Specialists are ready to help you
Thank you for your excellent support.
The best of luck in your new venture.
Customer: replied 2 years 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
None at all, I think it is an excellent idea and easier to manage.
Customer: replied 2 years ago.
Perfect. Many thanks for your help.Kind regardsSteve
Not at all, Steve.