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May Question and Answer Corner

Newsletter issue - May 08.

Q. I'm about to pay a significant initial franchise fee. Will I be able to deduct any of that cost from my earnings for my first year of trading?

A. It depends on exactly what the initial franchise fee represents. It may include elements for staff training, stationery, operating manuals, stock, which can be generally deducted from your trading income. However, a large part of the fee may represent know-how or goodwill attached to the franchise brand. This is a capital cost, which may be written off gradually against your profits if you trade as a company. The franchisor should provide you with an itemised breakdown of the initial fee, which we can help you analyse into deductible and non-deductible elements.

Q. Can the sole director of his own company be paid £5 per night when away on business without producing receipts to cover expenses incurred?

A. The £5 per night limit is for personal incidental expenses such as laundry costs and telephone calls, which are rarely supported by receipts. As long as the company does not pay more than £5 per night on average per business trip, the full amount paid will be tax free. However, if the company pays in excess of £5 per night, the total is taxable. Any amount paid or reimbursed by the company for actual personal expenses, such as laundry bills, must be deducted from the £5 nightly limit.

Q. We pay our employees a mileage allowance for business journeys in line with the Taxman's recommended rates. Can we reclaim any VAT in respect of those payments?

A. You can reclaim the VAT but only on the proportion of the mileage allowance that relates to fuel. The mileage rate of 40p per mile has a large element of reimbursement for the vehicle's other running costs. You need to use as a reference point the HMRC advisory fuel only rates which vary according to the size of the car, and are reissued several times a year. For example, if the vehicle has a 1500cc petrol engine and you reimburse the driver for 1000 miles, the value of the fuel used is 13p per mile: £130. The VAT element is 7/47 x £130 = £19.36. However, the employee must supply you with fuel receipts totalling at least £130 to allow you to reclaim the VAT shown on those receipts.

 

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What our clients say

Dakins Property Services

Great Results, Personable, High Integrity

Choice Events Limited

All at Beauchamp Charles are very helpful, approachable and easy to talk to. They keep me informed with key dates; I can feel totally confident that I won't ever miss any deadlines! Whoever I deal with, always deal with matters professionally and efficiently and if they are unavailable they get back to me promptly.

FT leisure Ltd

I have worked with Beauchamp Charles as our management accountants for over 20 years and have never received anything less than exceptional service. Their approach is both professional and personal. Finances and particularly tax strategies are a minefield for small businesses; Beauchamp Charles have in-depth knowledge of these area, which is comforting. They pay very close attention to our business activities and have provided financial strategies that have helped our company develop.

Fredrick Thomas Electrical and Maintenance

We have used Beauchamp Charles since company formation back in 1998. Beauchamp Charles offers us a one to one service as they are small enough to offer this dedicated service and large enough to do the work and offer best advice. They get to know us as individuals and a business, always giving sound advice. Frederick Thomas Electrical are in a stronger place thanks to the service we get from them.

Barnes Walker Landscapes Limited

We are a small business and had employed the same accountancy firm for many years. Two years ago we took the decision to switch to Beauchamp Charles after several othe local businesses recommended them very highly to us. We have not been disappointed with the service they have provided to us over these last two years.