Cathryn Hayes - HSBC Head of Franchising

There can be no denying that 2011 has been a challenging year. However, HSBC lent at record levels to franchised businesses in 2011, and we are continuing to actively support the sector with the aim to further grow our lending book in 2012.

Banks are more likely to support a business with a well-researched and structured business plan, particularly those that demonstrate a strong understanding of their finances. Franchising has a number of advantages here. Although not recession-proof, the wide spectrum of sectors covered by franchising means that the UK franchise industry is likely to fare better in these difficult times. The failure rate for franchises is much lower than for standalone start ups. This is predominantly due to the support of the franchisor and other franchisees in the network, who can help new franchisees avoid the pitfalls associated with starting up a business.

So, how can franchisors help to support their franchise owners both new and existing? Monitoring and control is even more important than ever – knowing what is happening in your network has never been more important.

Planning is vital – even though none of us know what is round the corner, a robust business plan can help to keep a business on track and ensure that franchisees know which areas to focus on to keep their businesses healthy.

Try to ensure that your franchisees are working well with their bank. These are the problem areas – things which can lead to a breakdown in the relationship:

• not supplying agreed information on time
• failing to make loan repayments
• repeatedly exceeding overdraft limits
• unexpected or persistent trading at a loss
• not using facilities for the agreed purpose (such as personal expenditure)

Look at your own requirements as a franchisor too. We deal with a wide range of franchisors, from fairly small businesses setting out on the franchise route, to major corporates. Regardless of size, it is important to:

• Have a clear view of where the business is going – what are your aims for expansion? How much are you going to need to spend to achieve that?
• Keep good financial records and forecasts. In this way you can apply for new finance before you need it urgently. Banks will look more favourably on such requests as it shows you are in control and can plan.
• Understand how financial ratios work. They are good indicators of a business’ health and these are what banks use to assess your financial health and that of your franchisees.

Consider alternative methods of funding working capital, like invoice finance, which involves raising finance using your debtor book. The advantage of this is that cashflow is directly linked to business expansion. This method is not suitable for all businesses – your bank will be able to advise you.

Another funding method to consider is asset finance to fund the purchase of equipment for the business. This can help ease cash flow by spreading repayments over a period of time instead of making a one-off investment.

It is worth investing time to develop a strong relationship with your bank, making sure they understand your business model and can work with you to develop financial packages tailored to your individual needs and those of your franchisees.

To conclude, HSBC is definitely open for franchise business and finance will be available to quality applicants who can demonstrate they have a good understanding of their chosen franchise model and the financials of their business. We look forward to working with you and your franchisees in 2012!

Posting from the monthly HSBC Connections newsletter. For more information or to get on the mailing list for the newsletter please email franchiseunit@hsbc.com

Cathryn Hayes - HSBC Head of Franchising

There is no denying that 2011 has been a difficult year for UK businesses. The economic recession forced sweeping changes in strategy for many businesses – add to this the change in Government at last year’s general election, increased unemployment and reported lack of available credit and it’s not surprising many firms have struggled.

However, with significantly better success rates than other businesses, the franchise industry is key to promoting job creation, stimulating economic growth and encouraging new start-ups. This is mainly due to the wide spectrum of industries covered by franchised businesses, the strength of the business model and the support provided by franchisors and other franchisees within the same networks.

Nowhere is this success more evident than this year’s bfa HSBC Franchisee of the Year Awards. Financial stability, innovation, creativity and the relentless pursuit of success were just a few traits demonstrated by this year’s finalists.

The overall winners, Mike and Catharine Chalton from Home Instead Senior Care in Wirral, showed that their key success was providing excellent customer service which has resulted in their business going from strength to strength. They are a true credit to the franchising industry, and an inspiration to small businesses across the UK.

So what about finance? Put simply, there is still plenty of funding available for sound business propositions. Your franchisees are in a stronger position than a standalone start-up business because of the help and support available to them. Requests for funding are more likely to be agreed if franchisees present a professional and credible business plan.

This could be the time to think about switching your business. There is often a nervousness that surrounds ‘switching your bank’, for fear of disrupting vital transactions. The UK’s leading banks, including HSBC, have signed up to a banking industry code that means they must make account switching speedier and easier for customers who have made their mind up their mind to change.

We have consistently welcomed new franchise business, and we are confident that by the time 2011′s Christmas trees have been packed away HSBC Franchise Unit will have improved on our 2010 lending figures by 200%.

Posting from the monthly HSBC Connections newsletter. For more information or to get on the mailing list for the newsletter please email franchiseunit@hsbc.com

Are you are a franchisor with an annual turnover of between £100,000 and £2m with ambitions for growth?

HSBC are currently offering the opportunity for businesses to win one of four HSBC business growth grants that are on offer to entrepreneurs seeking to expand their businesses.

Two grants will be awarded to businesses using innovative ideas to grow their businesses within the UK and two further grants will be awardded to businesses that have the aspiration to develop their opportunities overseas.

For fill details and an application please visit: http://www.businessgrant.hsbc.co.uk/. Closing date for applications is 31st December 2011.

Cathryn Hayes - HSBC Head of Franchising

We thought we’d share some tips to help franchisees present a strong business plan and help them to raise finance.

Other sources of income
It is vital for a new franchise to provide enough income for the owner to live on, in addition to servicing any borrowing they have, particularly in the early years. Many franchisees have a supportive partner behind them who often continues to earn a regular wage. This additional household income reduces the franchisee’s dependence on the profits of the business. It is therefore important that a franchisee provides a summary of all their domestic income and expenditure, demonstrating just how much money needs to be taken out of the business.

Understand the figures
We see many examples of franchisees simply presenting figures given to them by their franchisor, without really understanding what they mean. As franchisors it is essential that you encourage your prospective franchisees to take ownership of their figures, particularly the cash flow forecast. If they are unable to explain these to the lender in a convincing fashion, they could be turned down for the finance they need to get their business off the ground.

Cash flow forecast
In contrast to the above, we are sometimes presented with a cash flow forecast and little else. The bank won’t just focus solely on figures. The business plan needs to demonstrate the franchisee’s business skills and experience and that they have fully researched the local competition and understand their market etc. Whilst the cash flow forecast tells a lender what should happen, the business plan explains how it could be achieved.

It’s not just about the franchisee
It is important that Franchise Unit hold up to date information on your franchise to share with lending managers.  It would therefore be helpful if you forward your audited accounts to us on an annual basis and provide details of any management changes,  franchise cost increases, modifications to the franchise model or legal agreement. These regular updates will provide the franchise team and the lending manager with a good understanding of the franchise.

Whilst the majority of business plans we receive are perfectly suitable, we hope these few pointers will help make it easier for franchisees to obtain the finance they need.

Additional help and assistance on writing a business plan can be found at HSBC’s Knowledge Centre, an online resource to help small business owners whatever stage their business is at.

Posting from the monthly HSBC Connections newsletter. For more information or to get on the mailing list for the newsletter please email franchiseunit@hsbc.com

Chris Roberts - Director, Franchise Finance Ltd

This third article which features the Profit and Loss Account follows on directly from the first two articles in the series which covered the balance sheet. If possible do read part 1 and part 2 first as there is a natural progression to this point.

The Profit and Loss Account

This is the second and an equally important part of a set of accounts. As the name suggests, the purpose of the document is to show whether the business has made a profit or a loss over a specific period of time (e.g. a month or a year). It shows the total of the sales less the direct cost of those sales (i.e. if the business sold furniture then the cost of buying or making the furniture) which gives the Gross Profit. The next part shows the deduction of the overheads such as rent, fuel, insurance, advertising etc. and also depreciation (see below), giving a Net Profit (Before Tax).

At this stage it is worth asking what normally constitutes an overhead for the purpose of inclusion within a profit and loss account. The answer is that these ‘expenses’ are distinguishable because once these payments are paid away they are ‘gone’ (or will shortly be gone) and nothing individually is left: e.g. electricity or rent. However, payments for assets such as vehicles, fixtures and fittings and equipment are not set against profits when they are purchased because they remain within the business to help you continue trading. They have therefore not ‘disappeared’ as you still have them.
This is a good time to mention Depreciation. We all know that at the end of the year a vehicle will be worth less than the amount of money paid for it at the start of the year. This is accounted for by charging a percentage of its value (say 20% – but this varies depending on the expected usable life of the asset) to the P&L account and reducing the value in the balance sheet by the same amount. The year-end balance sheet then gives the true value of the asset, which of course it is supposed to do.

Wages will be shown in the P&L in a number of different places depending on the nature of the business. For example if the business referred to above made the furniture, the wages paid to the manufacturing staff would be shown with the cost of sales and therefore be included in the Gross Profit calculation. Wages relating to say admin or sales staff would be included with the other overheads and therefore within the ‘net profit’ calculation.
In a sole trader or partnership business the owner’s wages are often referred to as drawings and are normally shown after the Net Profit figure. The remaining amount, which is called the ‘Retained Profit’, is then transferred to the owners ‘Capital’ part of the Balance Sheet. In a Limited Company, the ‘drawings’ are called Dividends and the owners are called Shareholders. The shareholders decide how much of the Net Profit after tax they want to pay themselves and make a Dividend payment (which is normally in proportion to the number of shares they hold) and if there is any money left over (Retained Profit) this is transferred to the Capital part of the balance sheet as part of the Profit Reserves.  A more detailed example Profit and Loss Account is shown below.

VAT is a highly technical subject but for the purposes of this article and assuming your franchise is (or will be) registered for VAT, then you need to know that you exclude VAT in the Profit and Loss Account. The reason for this is that you are simply acting as a VAT collector for the Tax Authorities. The VAT you charge does not belong to you so it does not form part of your profits. However, in most cases, you are able to offset the VAT you pay against the VAT you charge and only pay over the difference. Do please always refer to your accountant though, to ensure you are dealing correctly and efficiently with VAT in your particular set of circumstances.

If you have been brave enough to read through the three articles I have written so far in an attempt to dispel some of the fears or concerns that people sometimes have about reading or understanding a set of accounts then I thank you. Do please drop me a line by email at chris.roberts@franchisefinance.ltd.uk and let me know if this is the case. I am planning next to write about how you can use this knowledge to monitor and improve the performance of your business. Watch this space!

The author, Chris Roberts, runs a series of one to one and group courses and Franchise Finance also prepare full business plans and financial projections for their clients.

This second article follows on directly from the first article (which should be read first) and starts by showing how the more easier to understand ‘side by side’ (Assets on one side and liabilities on the other) style of balance sheet has over time been replaced by the now commonly used ‘vertical’ style, so as to make the document more useful and highlight certain useful things (see later).

Therefore the old style balance sheet shown below…

has now been replaced by this…

Please note, in the first instance, that all the same category headings and related blocks of figures are used. The next thing to note is that it can still be described as a ‘Balance Sheet’. It’s just that by changing the layout and ‘doing sums within sums’, we are looking at two different balancing figures. In fact the figures immediately tell us, at first glance what the business is worth, on paper, on the balance sheet date: i.e. in this case £12,500.

Chris Roberts - Director, Franchise Finance Ltd

This is because the difference between the Total of the Assets less the total of the Current and Long Term Liabilities is what is left as the owners share. Put another way, if all the assets were sold at their book value and all the liabilities were paid (£56,000-£43,500,000) the amount left, or ‘paper value’ of the business, is £12,500. This is sometimes referred to as the ‘Surplus Resources’ of the business.

The next most useful thing to consider is the amount of ‘Working Capital’. This is the difference between the Current Assets and the Current Liabilities i.e. in the short term, is it likely that the business will have enough cash or be able to generate enough cash (by collecting in debtors or selling more stock) in order to pay its short term liabilities. Normally, the bigger the amount of working capital the safer the business is. However if the make-up is a small amount of cash, old or doubtful debtors and say outdated or slow moving stock, then obviously this won’t help much!

Something else that is of interest to lenders, investors and other trading companies who are checking your franchise business out (this may be suppliers or existing or potential customers) is the Gearing Ratio shown by your balance sheet. This is the relationship between the ‘Surplus Resources’ mentioned above and any borrowed money (e.g. bank loans, overdrafts, leasing, HP, factoring etc.).

Gearing is normally expressed as a percentage e.g. where the surplus resources are £50,000 and the borrowing is £50,000 i.e. a ratio of 1:1 this is 100%. This means that the lenders do not have more than you invested in the business and is a good bench mark because most lenders start to become concerned when the ratio starts to get much bigger than this, particularly if they do not have any security.

Balance Sheet Summary

Now you understand what a balance sheet is and are beginning to see what it tells you about your franchise business, you can see it is a very useful document. It becomes even more useful when you look at trends over say three consecutive balance sheets (and this aspect will be referred to further in a separate forthcoming Article next month). Also, you can use your increasing knowledge to investigate the financial strength of your customers, potential customers or even your suppliers to help you make safer decisions on who you should be doing business with.

However, the third and final Article in this series will cover the Profit and Loss Account which is the second and equally important part of a set of accounts. This will be published next week.

The author, Chris Roberts, runs a series of one to one and group courses and Franchise Finance also prepare full business plans and financial projections for their clients.

Chris Roberts - Director, Franchise Finance Ltd

This is the first part of a series of three articles written on the above subject by Chris Roberts of Franchise Finance and provides an introduction to the balance sheet.

“A Balance Sheet, in simple terms, is a list (or a snap-shot in time) of the Assets and Liabilities of your business. Right at the outset it will help if you accept and understand three fundamental things.

1.    It is called a Balance Sheet, because the value of the Assets will always equal the value of the Liabilities (assuming you have correctly completed your accounts!).

You can think of it as a set of scales or a seesaw – see below.

2.    YOU are not the business (even if you are a sole trader). Look at it as a separate thing. It is, for arguments sake, sitting in a box on the other side of the room. If you invest £1,000 into your new business on day one, that investment in the accounts of the business is a Liability, because ultimately the business (sitting on the other side of the room) owes it back to you. The corresponding entry, i.e. to make the balance sheet balance, is that the business now has an Asset of £1,000 sitting in its bank account.

3.    There is a concept in book-keeping called ‘Double Entry’. This means that every time you undertake a business transaction there will be two entries to be made in your accounts. The above example shows this.
If the next day the owner of the business takes a loan of £500 in the name of the business and buys some equipment worth the same amount, the balance sheet will be updated with two more entries (in this case, once again, one on each side). It will look like this:

However, if the business owner had used the money in the business bank account, rather than a new loan, it would have looked like this, with two entries being made on the same side (plus 500 and minus 500) ensuring that the Balance Sheet still balances.

So, to sum up the 3rd fundamental point, every business transaction will have 2 entries on the Balance Sheet; one on each side or a plus and a minus on the Asset side or a plus and a minus on the Liability side. The end result is that both sides will continue to balance.

Most assets and liabilities that you will come across will fall into one of the following categories. You need to understand which and why so that you can then use your balance sheets, in due course, to help you run your business more efficiently (see forthcoming Articles). The headings are shown below:

Current Liabilities are Liabilities that need to be paid within the short term (strictly speaking 12 months from the balance sheet date). Therefore they would normally include Trade Creditors, Bank overdrafts, VAT and most other taxes. Long Term Liabilities are therefore anything due for payment after 12 months, e.g. a long term mortgage or bank loan.

Capital is the amount of money permanently invested in the business by the owner (or owners) and Reserves include things like past profits that have not been drawn out and a revaluation upwards of say a property owned by the business.

If you are asking yourself ‘How can PROFIT be a liability?’ the answer is that any profit made by the business is owed back to the owner of the business (in the same way as the capital invested is also owed back to the owner/investor. It is therefore a liability of the business.

Current Assets are money (cash or positive bank balances) or things that are ‘nearly money’, i.e. that can be turned into money in the short term e.g. debtors (people who owe the business money) or stock (when it is sold). Current Assets will come and go, i.e. regularly change around as for example when cash is used to buy stock which is sold on credit thereby creating a debtor, which when paid is turned back into cash (this is called the ‘Working Capital Cycle’ and is covered in more detail in a forthcoming article).

Fixed Assets, by contrast and as the name suggests, stay in the business because they are needed to run the business on an ongoing basis. They therefore include things like property, vehicles, equipment and fixtures and fittings.

The concept of a Balance Sheet is a lot easier to understand, in the first instance, when it is viewed on this ‘seesaw’ side by side basis, and indeed, many years ago this is how balance sheets were actually prepared. However today the figures are arranged in a slightly different format and this will be explained in Article No. 2 next week, along with some examples of how to interprate and use the information contained in a balance sheet to help run your business.

The author, Chris Roberts, runs a series of one to one and group courses and Franchise Finance also prepare full business plans and financial projections for their clients.

Carl Reader, Dennis & Turnbull Ltd

If you are considering buying a franchise, then obtaining funding in orde to start up your new franchise business will be high on your agenda. Over the past number of years there has been much talk about obtaining finance from banks becoming more difficult due to more stringent criteria in order to meet borrowing requirements.

The good news is that the UK’s major banks look likely to meet their small business lending targets as agreed with the Government.

According to the British Bankers’ Association (BBA), the main five high street banks (Barclays, HSBC, Lloyds, RBS and Santander) loaned £37.4 billion to SMEs in the first six months of the year.

Under the terms of Project Merlin, to which the banks signed up as part of Government plans to boost the levels of credit and finance available to smaller firms, the target for the whole of 2011 is £76 billion.

A spokesperson for the Merlin banks said: “The first half year performance demonstrates the banks’ commitment to providing businesses with the financial support they need to invest and grow and the significant progress made this year.

“The banks’ efforts to encourage customers to come forward with borrowing proposals are set against the overall economic environment which remains challenging and business demand for credit which remains weak.”

Carl Reader is the head of franchising at franchise accountants Dennis & Turnbull, a leading firm of accountants in the franchise industry.

The above information is provided as general advice and no liability is accepted by the author, Dennis & Turnbull or Select Your Franchise in respect of individuals or businesses acting on the above. Independent advice should be sought in all circumstances.

Cathryn Hayes - HSBC Head of Franchising

It is inevitable that at some point franchisors will be faced with franchisees who wish to sell their business – particularly mature franchise systems.

There are two types of sale that the franchisee can employ: share sale or asset sale. These are very different, and it is important that both the buyer and seller understand the implications of each.

In a share sale, the buyer purchases the shares in the trading company. The ownership of the company changes, but the trading business stays exactly as it was before the sale.

In an asset sale, the trading business is transferred from the seller to the buyer. After completion of the sale, the seller will be left with a shell company (subject to any assets or liabilities that the buyer chooses not to take), the assets having been transferred to the buyer. The business is operated by the buyer through a different legal entity.

The asset sale is probably the easiest for all parties concerned as it gives the flexibility to pick and choose which assets and liabilities will transfer. However, a share sale is typically more tax-efficient for the seller.

To put this in perspective, with the right structure a share sale may incur a Capital Gains Tax liability of 18% (reduced to 10% as Entrepreneurs’ Relief is likely to be available). An asset sale could incur a tax liability of over 50%, as Corporation Tax is paid by the company on the sale price and then Capital Gains Tax or Income Tax is paid by the individual extracting the profit from the company.

However, share sales pose a greater risk to the buyer as they will inherit all liabilities, known or unknown. This can include unpaid tax, property liabilities and possible litigation by customers or staff. Therefore, buyers will need to gain a thorough understanding of exactly what they are acquiring before committing themselves, and we would recommend independent legal advice is sought.

If there are any existing finance agreements in place, with an asset sale there will be a change in legal entity and the lender’s consent would be required. This is not the case with a share sale, but ‘change of control’ provisions are becoming increasingly common, which allows the finance agreement to be terminated.

If the franchise operates from premises then there are further issues to consider. If an existing lease is to be transferred to the buyer, the landlord’s consent will be required. This consent is also required for an asset sale and Stamp Duty Land Tax will be payable, another cost which must be factored in.

If the franchisee employs staff, the type of sale will affect them in different ways. If the buyer wishes to reduce the number of staff, Transfer of Undertakings Protection of Employment (TUPE) rules will apply in an asset sale. This is not the case in a share sale as the employment contract continues as before.

Kate Legg, Commercial Associate at Higgs & Sons Solicitors specialises in franchise law and has experience of franchise re-sales. She commented, “Some franchise networks do not have any formal re-sale procedures in place and those that do usually have a process geared towards asset sales, but not share sales. This is an area that needs to be considered carefully. Different processes will work better for different networks – it is not the case of ‘one size fits all’. Having established what process fits with the network, the franchise agreement should then reflect that”.

In summary, there are pros and cons to both the asset and share sale options. Sellers would usually choose a share sale, while purchasers tend to prefer the simpler and less risky asset purchase. If any of your franchisees are thinking of buying or selling a franchise, it is essential that they take legal and accounting advice at the outset and consult with you throughout the process.

Posting from the monthly HSBC Connections newsletter. For more information or to get on the mailing list for the newsletter please email franchiseunit@hsbc.com

Chris Roberts - Director, Franchise Finance Ltd

Understanding the difference between ‘Profit’ and ‘Cash’ will help you to avoid problems when considering financial projections. The issue is best explained by looking at a business that gives one month credit when it makes a sale. If the invoice for a large profitable sale is projected to be issued in June then the invoice amount will be included in the P&L sales in June and a ‘profit’ will be shown in that month. However the actual money is not expected to be received until July so it is shown in the CFF in July. Unfortunately if the business needs to pay say wages at the end of June, it may not have enough money until the funds from the sales invoice are received in July. So even though the business has made a ‘Profit’ it has a serious ‘cash-flow’ problem. The technical term for this problem is a ‘lack of working capital’ .

By producing both a projected P&L and a separate cashflow forecast the problem can be identified and extra working capital can be arranged in advance.

At this stage it is worth emphasising that the projected P&L incorporates trading expenses i.e. things like rent, fuel, insurance and wages, all of which reduce your profits (or increase your loss). They are distinguishable because once these payments or ‘overheads’ are paid they are ‘gone’ and nothing individually is left. However, projected payments for assets such as vehicles, fixtures and fittings and equipment are not set against profits when they are purchased because they remain within the business to help you continue trading. They need to be included in the cashflow forecast because you will pay money away when you buy them and recorded in the balance sheet as an asset because your business will own them.

You will see here how there are two entries to make. This in fact applies to every business transaction that you project. For example wages will be shown in the P&L (as mentioned above) and also in the cashflow forecast. This is called ‘double entry book-keeping’ and as I will explain in subsequent articles, why ‘Balance Sheets’ should actually ‘balance’.

Another common mistake is to either forget about or incorrectly deal with VAT in the projections. Many businesses will quote their costs to you excluding VAT so you will need to add it on, where applicable. This is a highly technical subject but for the purposes of this introductory article and assuming your franchise is (or will be) registered for VAT, then you need to know that you exclude VAT in the P&L and include it in the CFF. The reason for this is that you are simply acting as a VAT collector for the Tax Authorities. The money does not belong to you so it does not form part of your profits. However, it does pass in and out of your bank account so it does need to be shown in the CFF.

And finally for now ‘Depreciation’. We all know that a vehicle purchased at the beginning of a year will be worth less at the end of the year. This is accounted for by charging a percentage of its value (say 20% – but this varies depending on the expected usable life of the asset) to the P&L account and reducing the value in the balance sheet by the same amount. The year-end balance sheet then gives the true value of the asset, but bear in mind ‘depreciation’ is a ‘book-entry’ and the system does not store up cash to buy a new van!

Chris Roberts runs a series of one to one and group courses and Franchise Finance also prepare full business plans and/or financial projections for their clients.

Chris Roberts - Director, Franchise Finance Ltd

Do you fall into one of the following categories when it comes to accounts and financial projections?

• Don’t understand them (but maybe pretend sometimes that you do!)
• Find you’re scared of them or just see a jumble of numbers.
• Can’t see the need for them or simply rely on other people to understand them for you.

If you can say yes to any one of the above then you are taking a big risk with your new or existing franchise business.

This first article from me on this subject is split into two parts. The first sets the scene and provides a simple introduction, in layman’s terms, to some of the key things you need to know. The second part describes some common mistakes and misconceptions. I will then follow this up with some further detail over the coming weeks in order for you to better understand the financial aspects of your business so that you remain in control and ‘get where you want to go’.

So, to begin with, I suggest writing down your ‘Business Objectives’ i.e. what you are trying to achieve. It helps to look at this in three steps, the short term, the medium term and the longer term. (For the purpose of this article we are going to focus on the short to medium term). You then need to think about what resources you are going to need over that period to achieve those objectives.

The next step is to transfer all these ‘hopes and aspirations’ into £’s and pence, to see how well it will work in practice. The biggest mistake, however, is to try and do this on one spreadsheet or one piece of paper. If you do, you are likely to start making some serious mistakes. You need three, otherwise you will get the concept of ‘profit’ mixed up with the realities of ‘cash’ and also not deal properly with your assets and liabilities. The three separate parts to your financial projections are:

1. The Profit and Loss Account (Your sales less trading costs which give you a profit or a loss)
2. The Cashflow Forecast (A mirror image of what your bank account should look like)
3. The Balance Sheet (A list of your business assets and liabilities)

In layman’s terms, and to help differentiate between the three, the 1st shows what you hope to do (and whether it is worthwhile doing it!), the 2nd shows how much money you will need to do it (or turning this on its head it shows you ‘if you can afford to do it!) and the 3rd shows what your business will look like at a particular time in the future. This should be of interest to you and will be needed by your bank if you want to borrow money.

The profit and loss account (P&L) and the cashflow forecast (CFF) are normally prepared on a corresponding monthly basis for the period of a year and the related balance sheet (which can be described as a ‘snapshot’ in time) shows the assets and the liabilities on the last day of that year.

I will expand on all of this in Part Two of this Article.

Chris Roberts runs a series of one to one and group courses and Franchise Finance also prepare full business plans and/or financial projections for their clients.

Chris Roberts - Director, Franchise Finance Ltd

Undoubtedly Banks are open for business, providing the proposition they are assessing has been correctly thought through and presented by way of a professional and viable business plan.

This means not only that the plan has to show how the money is going to be used, and how and when the borrowing is going to be repaid, but also a host of other important things. For example: the personal finances of the owner/s themselves, recent and up to date trading accounts (if the business is already trading), the basis on which the financial projections have been prepared (i.e. providing some evidence to back up the assumptions), and some comment on the market and the competition, explaining why the business is going to be competitive.

Bankers will always be looking for ‘a safety net’ in case things don’t go according to plan so it’s a good idea to cover this if you can, e.g. that you or someone else can invest more funds if absolutely necessary. That’s also why banks sometimes like to have security. However, if you do not have any available (e.g. sufficient equity in your house) then the Government’s Enterprise Finance Guarantee Scheme may come to your rescue.

Chris Roberts runs a series of one to one and group courses and Franchise Finance also prepare full business plans and/or financial projections for their clients.

Mark Scott - Director, Franchise Development, NatWest

As it has been 4 months since the launch of the NatWest/ RBS Franchise Fund on the 7th February, I thought it would be useful to outline some of the things that have happened at RBS/NatWest as a direct result of the launch and its success.

I am very pleased to say that the fund was extremely well received by both the franchise sector and the media. A successful communications, media and broadcast campaign was undertaken, reaching an estimated audience of 17 million people, with interviews on 29 regional radio stations, appearances on BBC Breakfast, Radio 5 Wake Up To Money & Today Radio 4. A number of National & Evening Newspapers also picked up on the story and this continues across the regions. This is fantastic news for franchising in general.

Since its launch, we have seen at least double the number of leads & enquiries in the team and we think this is likely to continue for the foreseeable future. So far, we have over £44m of loans under consideration or agreed.

More recently, we have revamped our external RBS & NatWest websites and links are attached below. You will see that amongst other things, we have added details of the fund and a newly created “Call Back Service”, which makes franchisee interaction with us even easier.

The annual NatWest/BFA Survey was also launched last month where BFA members now receive a copy as part of their membership package. The survery is also available at a cost for non members.

For further information or to contact NatWest or RBS please go to www.natwest.com/franchise or
www.rbs.co.uk/franchise

Carl Reader, Dennis & Turnbull Ltd

The Government has announced proposals intended to make flexible working that much more effective. This will have an impact on franchisors and franchisees alike where they employ staff for the running of their franchise businesses.

Part of the plans include a significant overhaul of the rules governing shared parental leave.

But the proposals also look to extend to right to ask for flexible working to all workers, provided they have been with an employer for a minimum of 26 weeks.

Currently, the right is restricted to those employees with children aged 17 or under.

The Government is to examine the advantages of publishing a statutory Code of Practice for businesses and will propose that employers should be allowed to take into account employees individual circumstances when considering conflicting requests.

There are no plans to alter the current eight business reasons for a business to turn down a request for flexible working.

On equal pay, employment tribunals that have found an employer to have discriminated on gender in relation to pay will be obliged to order the employer to conduct a pay audit and publish their results.

Amendments to the Working Time Regulations will see changes that allow annual leave entitlements to be rescheduled, and carried over to the next leave year, when a worker falls ill during planned annual leave. This will be limited to the four weeks of Working Time Directive leave.

The Government likewise plans to amend the WTR to allow the carry-over of annual leave due to maternity, paternity, parental or adoption leave. This will include the full 5.6 weeks of leave entitlement per year.

The changes, which are going out to consultation, are also investigating the possibilities of giving businesses greater flexibility around annual leave, enabling them, for example, to buy out untaken leave and to carry over leave on justifiable business grounds (this would only apply to the 1.6 weeks of domestic statutory leave).

David Frost, the director general of the British Chambers of Commerce, expressed disappointment at the measures.

He said: “The proposal to extend the right to request flexible working would replace current regulations with a code of practice, but we question whether this will make any real difference. In fact, it could just cause more confusion.

“Introducing automatic equal pay audits will not deliver real progress on equal pay. A bureaucratic and one-size-fits-all approach will mean many companies will be forced to go through a pointless exercise that does benefit their business or employees.

“Plans to amend Working Time regulations to reflect recent European rulings will only cause more confusion for employers, while creating extra costs. The Government could have waited for more clarity from Brussels, where this issue is currently being debated, and avoided an immediate impact on business confidence. Instead, their actions could mean two sets of confusing changes rather than one.”

The new measures could well become part of employment law by 2013.

The consultation can be found at http://discuss.bis.gov.uk/modernworkplaces/

Carl Reader is the head of franchising at franchise accountants Dennis & Turnbull, a leading firm of accountants in the franchise industry.

The above information is provided as general advice and no liability is accepted by the author, Dennis & Turnbull or Select Your Franchise in respect of individuals or businesses acting on the above. Independent advice should be sought in all circumstances.

Cathryn Hayes - HSBC Head of Franchising

HSBC has launched a new initiative to support growing UK businesses that are creating new jobs. Available immediately, businesses who take out an Employer Loan will benefit from a discount of up to 3% off the interest rate payable, if they have employed additional staff in the previous six months. HSBC’s Small Business Loans are available to businesses with a turnover up to £2 million that require lending of between £1,000 and £25,000, with repayment terms between 12 months and 10 years. Interest rates payable on the Small Business loan start at 7.9% AIR (Annual Interest Rate) and businesses that have recruited during the last six months will benefit from a 1% discount for each person recruited, up to a maximum 3%.

This new initiative is available to both new and existing HSBC customers and will initially be available for a three month period. To evidence new employment, a P45 or P46 dated within the last six months must be produced and noted by the bank. This cannot be for the owners of the business or immediate family but may include apprenticeships, part-time and key-time employees.

For further information and to receive a quote small businesses should contact their local small business adviser, call 0800 030 4516 or visit www.hsbc.co.uk/employerloan

Carl Reader, Dennis & Turnbull Ltd

A summary of some points that may affect your business as a franchise, from the 2011 Budget announced yesterday:-

• It was confirmed that the Income Tax rates previously announced will come into effect from 6^th April 2011.  The personal allowance will increase to £7,475 for 2011/12 with a further increase to £8,105 for 2012/13.  There will be a review carried out in respect of Income Tax and National Insurance Contributions to look to integrate them in the future.
• Capital Gains Tax rates have remained the same.  The annual exemption will increase to £10,600 from 6^th April 2011.  However, the lifetime limit for Entrepreneurs’ Relief has doubled to £10 million for disposals made from 6^th April 2011.  The Inheritance Tax nil rate band will remain at £325,000 until 2014/15.
• The rate of corporation tax for 2011/12 for small companies will reduce to 20% as previously announced.  For large companies it is now reduced to 26% and will further reduce by 1% each year until it reaches 23%.
• The VAT registration threshold has increased to £73,000 with the deregistration limit increased to £70,000.  The fuel scale charges have also been increased for periods starting from 1^st May 2011.
• The authorised mileage rate has finally increased to 45p per mile for the first 10,000 business miles per annum from 6^th April 2011.  Any mileage over this will continue to be at 25p per mile.
• With regard to business rates the government will continue to fund a temporary increase in the level of rate relief so that small firms occupying properties with a rateable value up to £6,000 will pay no business rates for another year to October 2012.

A more comprehensive analysis of the 2011 budget can be downloaded at the following link:-
http://www.dennisandturnbull.com/budget-2011

Carl Reader is the head of franchising at franchise accountants Dennis & Turnbull, a leading firm of accountants in the franchise industry.

The above information is provided as general advice and no liability is accepted by the author, Dennis & Turnbull or Select Your Franchise in respect of individuals or businesses acting on the above. Independent advice should be sought in all circumstances.

Mark Scott - Director, Franchise Development, NatWest

The new, dedicated NatWest Franchise Fund has been created to mark 30 years of NatWest’s involvement with the UK franchise sector. Today, we are as committed as ever to helping new franchisees make that first step to
running their own business.

What the Franchise Fund offers

The NatWest Franchise Fund aims to make it easier for franchisees to secure funding for their plans by providing financing through a dedicated Franchise Fund. The benefits of this being:-

• Benefit from a 1% reduced arrangement fee, available for the first year
• Take a 12-month repayment holiday in your first year. Interest will continue to accrue during the payment holiday and your monthly payments may increase afterwards
• Receive 20% off NatWest RiskRemedy, the compliance service offering guidance on Employment Law and HR and Health & Safety issues for up to 20 employees
• If your business is a start-up or has been running for less than 12 months you can also receive 2 years’ free business banking

Get the benefit of NatWest expertise

We are offering full support via the NatWest franchise team. With their depth of experience and expertise, they will be able to ensure you have the right business banking arrangements in place so everything runs smoothly. Plus, we can help guide you through the challenges associated with starting out as a franchisee.

Working with the British Franchise Association

The NatWest Franchise Fund is endorsed by the British Franchise Association (BFA). As the number one bank for franchises in the UK, NatWest works with the BFA and other affiliated members to support the franchise sector.

For further information you can visit: www.natwest.com/franchise

Cathryn Hayes - HSBC Head of Franchising

Bank finance has generated significant interest during the past two years in the wake of the financial crisis.  ‘Supporting UK Businesses’, published on 14 October by the Business Finance Taskforce in association with the British Banking Association (BBA), aims to address the concern that banks are not adequately supporting viable businesses.

Noel Quinn, Head of HSBC UK CMB said that the report, “Is a significant milestone for UK businesses and we fully support the recommendations.  Our lending position has not materially changed during the past two years and, compared to many competitors, our strong balance sheet has meant we have remained open for business throughout the financial crisis.  That said, it’s also important to recognise that we must do all we can to responsibly support businesses.  These recommendations are therefore a further positive step for all UK businesses and will help under-pin the UK’s recovery.”

The Business Finance Taskforce includes representatives from six UK banks, government and a number of trade bodies.  In July, the Taskforce agreed to review the support banks provide to small and medium sized businesses and ensure UK businesses have access to secure and sustainable sources of finance.

The report makes 17 recommendations, listed fully in the BBA summary and report, which focus on three key areas:

1. Maintaining better customer relationships
2. Ensuring better access to finance
3. Providing better information and understanding

This is obviously positive news for the UK franchising industry and HSBC fully supports the implementation of the recommendations during 2011.

Additional information about the Business Finance Taskforce can be found at: www.bba.org.uk/taskforce.

Cathryn Hayes - HSBC Head of Franchising

A new report commissioned by HSBC, called ‘Mapping the World’s Trade Connections’ shows how the world is trading today and where the opportunities may lie tomorrow.  It reveals that international trade is driving global economic recovery, with momentum picking up at a fast and sustainable rate, rising 25% in Q1 alone.

The Report indicates that UK trade is up 12% globally and 31% to emerging markets.  This is a strong sign that the UK is trading its way out of the economic downturn.  This is supported by the HSBC Trade Confidence Index out this week, which shows 92% of UK businesses surveyed during the second half of 2010 expect trade values to stay the same or increase over the next six months, with 53% seeing emerging markets as promising for trade.

The Report also reveals some new emerging market ‘stars’, which suggests that UK companies are keen to take advantage of the opportunities appearing in some of the world’s growing regions and countries.  The findings indicate that companies that export skills, knowledge and maximise the UK’s reputation for quality and creativity are the ones that will get ahead.

The report highlights the following for the UK:

Top UK trade partners (2000 to 2009)

• China – 260% increase
• United Arab Emirates - 130% increase
• India - 45% increase

Fastest export growth destinations by region (January to April 2010):

• Sub-Saharan Africa - up 64%
• Developing Asia - up 34%
• Middle East and North Africa - up 25%

Top trade sectors by growth (2000 to 2009) – pharmaceuticals, organic chemicals, petroleum oil and motor fuels.  Much of the development in these areas is due to the UK’s highly innovative manufacturing sector that supplies both components and products to these industries across the world.

Emerging sectors – printed publications (books and magazines), alcoholic beverages, precious and semi-precious stones, cosmetics, transport equipment and works of art.

Noel Quinn, Group General Manager CMB UK, explains: “We’re working with the UK’s thinking businesses to help them recognise and exploit their own strengths internationally, as we believe this is where both the UK economy and our domestic businesses have the greatest opportunity to prosper. This year our export lending is up 40% year-on-year and we’re helping a greater number of businesses begin to trade internationally.”

HSBC Commercial Banking and the experts interviewed identified five key steps that European businesses looking to internationalise must take. They are:

1. Take time completing the right research: A business’ success in a new country will depend on the level of research conducted at the outset.

2. Consider if the business is ready to trade internationally: Ask yourself when an international move can best fit into your business’ overall strategy.

3. Mitigate the risks: Mapping and therefore mitigating the risks early is key – consider the bigger picture.

4. Financing Trade: Careful planning is required to ensure that working capital facilities are in place at every stage of the trade cycle and companies should engage with their bankers at an early stage to determine the level and structure of facilities to finance their international trade.

5. Seek expert advice: The right advice will lead to the right decisions for your business.  Many organisations are experts in providing the latest information which will lead you to the development of an effective international strategy.

This of course also applies to existing franchisors who are looking to expand their franchising model internationally as well as companies who are thinking of using franchising for the first time in order to enter a new overseas market.

If international expansion is something you are considering and you would like a copy of the report please email franchiseunit@hsbc.com.

Carl Reader, Dennis & Turnbull Ltd

The emergency budget was a concern of many business owners as well as franchises. The announcements by George Osborne on 21 June were reasonably kind to business, ensuring that entrepreneurs were not unduly penalised for their efforts and risk.

The following bullet points summarise the key changes in the budget that will affect franchises. Further details will be released by the various news agencies once they have had a chance to digest the full text of the Finance Act, and more details are available on our main Dennis & Turnbull website.

• A change to CGT with 18% and 28% rates payable by individuals, depending on the amount of their total taxable income and the annual exempt amount remaining at £10,100. Gains qualifying for entrepreneurs’ relief will be taxed at 10% and the lifetime limit raised to £5 million.
• The main rate of corporation tax will be cut to 27% from April 2011 and the small profits rate will be 20%.
• A new regional employers’ NICs holiday for new businesses in targeted areas of the UK.
• Pensions: Annuity purchase can be delayed to age 77, from the current 75. The maximum annual tax relief on pensions is to be reduced, but state pensions will be indexed from April 2011.
• Individual Savings Account (ISA) limits will increase annually with RPI from April 2011.
• The standard rate of VAT is to increase to 20% from 4 January 2011.

Carl Reader is the head of franchising at franchise accountants Dennis & Turnbull, a leading firm of accountants in the franchise industry.

The above information is provided as general advice and no liability is accepted by the author, Dennis & Turnbull or Select Your Franchise in respect of individuals or businesses acting on the above. Independent advice should be sought in all circumstances.

Carl Reader, Dennis & Turnbull Ltd

In this second part on the likely affects of the emergency 2010 budget on franchise business, we will look at Business, Employment and some other changes.

To find out more about changes in taxation, please see the previous posting.

Business

The government is to focus on improving the flow of credit to smaller firms. This will include the possibility of establishing a loan guarantee scheme to replace the Enterprise Finance Guarantee programme and the use of net lending targets for nationalised banks.
Some backdated demands for business rates will be cancelled.

Pensions

The default retirement age is to be phased out, and a review will be held to establish the dates at which the state pension retirement age begins to rise to 66. There is a commitment that, in the case of men, this will not be before 2016 and, in the case of women, not before 2020.

Rules requiring mandatory annuitisation at 75 are to be dropped. At the moment, people who establish a pension savings fund must use the money to purchase an annuity, or an annual income for life, when they reach the age of 75, preventing them from passing on the capital to their heirs.
The link between the basic state pension and earnings will be restored from April 2011 with a guarantee that pensions are raised by the higher of earnings, prices or 2.5 per cent, as proposed by the Liberal Democrats.

Thus far, the government has not offered a policy on pensions tax relief. The Liberal Democrats had been in support of abolishing all higher tax rate relief, capping relief at the basic rate of income tax.

Employment

All existing welfare-to-work programmes are to end and are to be replaced by a single welfare-to-work programme.

Those Jobseekers’ Allowance claimants who must deal with the most significant barriers to work will be referred to new welfare-to-work scheme at once rather than after 12 months. In the case of those Jobseekers’ Allowance claimants aged under 25, they will be referred to the programme after six months.

The EU

There will be no further transfer of sovereignty or powers to the EU over the course of the next Parliament.

The government will work to make sure that the application of the Working Time Directive in the UK is limited.

Any future European treaty that involves the transfer of power will be subject to a referendum.

The environment

A green investment bank will be set up.

The government is to press ahead with a high-speed rail network but will reject plans for additional runways at Gatwick and Stansted.

A national planning statement will be drawn up to allow a process for replacing existing nuclear power stations with new ones, although Liberal Democrat MPs will be allowed to abstain on any vote on the plans.

Carl Reader is the head of franchising at franchise accountants Dennis & Turnbull, a leading firm of accountants in the franchise industry.

The above information is provided as general advice and no liability is accepted by the author, Dennis & Turnbull or Select Your Franchise in respect of individuals or businesses acting on the above. Independent advice should be sought in all circumstances.

Carl Reader, Dennis & Turnbull Ltd

All franchise businesses will be aware that the new government are looking to implement an Emergency Budget on 22 June.

In the first of this 2 part series we will look first at economy and tax changes.

The following information from our website helps to summarise the likely changes in the Budget:

The economy

There will be an accelerated reduction in the budget deficit, with £6 billion coming this year (although the commitment contains a proviso that the level of the cuts will be subject to advice from the Treasury and the Bank of England). The main burden of the cuts will be felt in reduced government spending rather than tax increases.

An independent Office for Budgetary Responsibility will be established to produce new growth and borrowing forecasts.

A full spending review is to be held in the autumn, following a consultative process involving all tiers of government and the private sector.

The coalition has ruled out joining the euro for the duration of the next Parliament.

Tax

Income tax

The personal allowance for income tax is to be increased, the first stage of which is to take effect from April 2011. There is to be a long-term policy of raising the threshold to £10,000, graduated across a number of years.

Inheritance tax

This will take precedence over Conservative plans to raise the inheritance tax threshold to £1 million from its present £325,000. Liberal Democrat proposals for a ‘mansion tax’ on properties worth £2 million or more are to be scrapped.

National insurance contributions

The funds required for an increase in the income tax personal allowance will come from the dropping of Conservative proposals to raise employees’ national insurance contribution thresholds. The increase in employers’ national contribution thresholds, however, will go ahead.

Married allowances

Another Conservative manifesto commitment to introduce transferable tax allowances for married couples stays in place, although Liberal Democrat MPs will be allowed to abstain in the Commons vote on the measure.

Capital gains tax

Capital gains tax on non-business assets will, at some point, rise to a rate similar to that of income tax; perhaps 40 per cent or 50 per cent. Exemptions, though, will be made for entrepreneurial business activities.

At present, CGT is only payable on gains over £10,100 in any tax year, chargeable at a rate of 18 per cent.

Corporation tax

The government has committed itself to a “long-term” plan to reduce the headline rate of corporation tax, possibly from 28 per cent to 25 per cent.

VAT

No pre-Budget announcements on VAT have so far been made.

However, speculation is rife that the Chancellor will give serious consideration to some sort of graduated increase, perhaps to as much as 20 per cent (the current level is 17.5 per cent, 2.5 per cent below the European average).

On the plus side, a rise in VAT has immediacy in producing a regular revenue. The downside for the government is that any increase could dampen consumer spending or fuel inflation.

Leading think-tank, the Institute for Fiscal Studies (IFS) has already suggested that VAT may the most viable choice of tax increase.

A rise in VAT to 20 per cent would generate an extra £11.5 billion of government income but would add an average of £425 to each household bill, a new report by Kelkoo, the shopping comparison website, has calculated.

Other tax measures

A switch to per-plane rather than per-passenger duty will be implemented.

The two parties have agreed to reduce the availability of child trust funds and tax credits for higher earners, those households, perhaps, on more than £50,000 a year.

A banking levy is also to be introduced.

In part 2 we will look at the Budget affects other areas such as business and employment.

Carl Reader is the head of franchising at franchise accountants Dennis & Turnbull, a leading firm of accountants in the franchise industry.

The above information is provided as general advice and no liability is accepted by the author, Dennis & Turnbull or Select Your Franchise in respect of individuals or businesses acting on the above. Independent advice should be sought in all circumstances.

Mark Scott - Director, Franchise Development, NatWest

Making bank finance could be easier for the franchise sector if franchisors and franchisees provide information in a timely manner.

Franchisors, particularly new ones, can make bank finance easier for their franchisees by providing information on their business at an early stage. The banks require the prospectus, legal agreement, latest accounts for the business and trading information on the locations they operate.

Once in receipt of this information the bank assesses the franchise offer and agrees what level of finance can be available for franchisees. If the franchise structure changes let the bank know.

Finance for franchisees can then be made easier by providing information about them in a timely manner.

Franchisees need to provide a business plan, ideally with 3 years cash flow and profit and loss projections and a balance sheet for year 1. They also need to complete an asset and liability statement, consent to undertake credit search and some further bank forms.

Provided the franchisee’s plan is in line with what other franchisee’s are actually achieving and they have a good credit history finance for them should be easier to obtain.

Cathryn Hayes - HSBC Head of Franchising

When looking to purchase a franchise, one of the most critical areas for prospective franchisees is obtaining finance. You, as franchisors, can help by advising individuals on what information they need to present to the bank in order to make the process of gaining finance as easy as possible.

Here are some key pointers to help prepare your franchisees for that first meeting with their bank:

• Ensure they produce a concise plan that sets out a clear strategy for their business.
• Their business plan should include well thought out financial projections, including a cashflow forecast, profit and loss account and balance sheet, ideally for between one and three years. This is a key area where you can give your franchisees an advantage over conventional start-ups by assisting them with the figures, based on the existing performance of your current franchisees. However, the franchisee must own and understand these figures to present a credible case to the bank manager. All too often our Commercial Managers tell us that they have been presented with figures that a potential franchisee cannot explain.
• Include a marketing plan detailing how they will target their potential customers and the unique selling point of the product/service offering. Again, you will be able to assist them with this.
• The plan should address any risks facing the business and what action needs to be taken to either prevent them or minimise their impact.
• Finally, encourage your franchisees to practise their presentation before meeting with the bank to ensure they deliver a professional “pitch”.

There is still funding available for sound business propositions. Your franchisees are in a stronger position than a stand alone start-up due to the help and support of their franchisor and other franchisees in the network.

Requests for funding are more likely to be agreed, if they present a professional and credible business plan.

Posting adapted from the monthly HSBC Connections newsletter. For more information or to get on the mailing list for the newsletter please email franchiseunit@hsbc.com

Carl Reader, Dennis & Turnbull Ltd

The Chancellor gave his Budget on 24th March 2010 and the changes announced will affect all franchise businesses.

50% Tax

It was confirmed that the new 50% rate of income tax will come into effect from 6th April 2010 for those with income over £150,000.  Personal allowances will also be restricted for individuals with income over £100,000.

Capital Gains Tax

Capital Gains Tax rates have remained the same.  However, the lifetime limit for Entrepreneurs’ Relief has doubled to £2m for disposals made from 6th April 2010.  The Inheritance Tax nil rate band has been frozen at £325,000 until 2014/15.

Stamp Duty

It was announced that no Stamp Duty Land Tax will be payable by first time buyers on completion of the purchase of homes below £250,000.  This takes effect immediately for 2 years until 25th March 2012.  The rate of Stamp Duty Land Tax charged on purchases of properties over £1m will be increased to 5% with effect from 6th April 2011.

Corporation Tax

There will be no increase in the rates of corporation tax for 2010/11 which will remain at 21% for small companies and 28% for large companies.

Capital Expenditure

There is a boost to franchises purchasing plant and machinery.  The annual investment allowance has increased to £100,000, giving a 100% first year allowance on capital expenditure up to this level.  Any additions over this amount will also receive capital allowances of 20%.  This applies to equipment bought after 1st April 2010 for companies and 6th April 2010 for unincorporated businesses.

VAT

The VAT registration threshold has been increased to £70,000 with the deregistration limit increased to £68,000.  The fuel scale charges have also been increased for periods starting from 1st May 2010.  It is worth noting that payments made by cheque to HM Revenue & Customs will now be treated as being received once the amount has cleared through their bank account and not when the cheque is received.

Business Rates

With regard to business rates the government will fund a temporary increase in the level of rate relief so that small firms occupying properties with a rateable value up to £6,000 will pay no business rates for 1 year from October 2010.

Carl Reader is the head of franchising at franchise accountants Dennis & Turnbull, a leading firm of accountants in the franchise industry.

The above information is provided as general advice and no liability is accepted by the author, Dennis & Turnbull or Select Your Franchise in respect of individuals or businesses acting on the above. Independent advice should be sought in all circumstances.