We have recently taken on a client who has taken over a High Street retail unit that had been run as a newsagent, selling magazines, stationery, cards, but also some toys, groceries and other convenience goods. Our client took over the business as a going concern.
We do not offer legal advice, but we were able to assist our client with issues related to the transfer of the employees from the old business to our client under the TUPE regulations. We also advised about the general contractual terms related to amounts payable under the contract including the valuation of stock, fixtures and fittings, and the relevance of VAT on the various elements of the consideration.
We worked with our client in advance of the purchase to produce a financial systems operating document setting out the procedures to be followed following completion.
Our client needed to carry out some immediate work on the store prior to starting to trade.
This included expenditure on deep cleaning the store, the purchase of new shelving units, investment in a new till system, a new CCTV system, and arranging new signage at the front of the store. There were numerous other aspects for them to manage that included the transfer of the alcohol premises licence, setting up with Camelot for the National Lottery takings, and staff training and uniforms.
Other similar projects we have been involved with have often incurred significantly higher expenditure on fitting out than was the case with this client. In all cases, no matter what the spend, consideration will be given to the availability of tax relief on the capital expenditure. A general rule that can be applied is that expenditure on the fabric of the building may often not attract tax relief, unless related to repairs, whereas the purchase of equipment, fittings, and other functional elements of the building, for example the electrical and plumbing systems, will often attract tax relief.
The nature of this client’s business has required timely bookkeeping and management accounts and we have supplied them with Xero bookkeeping software and back office support to maintain their books.
Their expense invoices are sent via Receipt bank, allowing automatic processing through to Xero. This simply requires a little time and care when setting up the suppliers in Receipt Bank so that the invoices are reproduced accurately in Xero. The till system links directly to Xero so that daily sales are posted to the client’s bookkeeping system. This fits in with the new MTD VAT regulations that were introduced last year and that require the links between the front and back ends of the bookkeeping system to be automated with minimal, if any, manual intervention.
With any form of retailing operation, it is imperative that a robust financial operating system is put into place as margins and cash flow will often be very tight and the client must remain on top of their numbers.
The client has recently taken out a loan to support their working capital requirement and the up to date management accounts have been vital in supporting that application.
The client is now looking at store number two and beyond. We are assisting them with the on-going funding applications that will build on what they have already achieved with their first store.
How can MJB Avanti help you?
This case study illustrates the various aspects that are brought into focus. MJB Avanti can assist our clients with these aspects including tax planning and advice relating to the fitting out or purchase of a commercial building and advising about the VAT impact of business transfers. In advance of that, we can assist with the due diligence process before you sign the contracts. From a bookkeeping and accounts perspective, we will advise on and set-up cloud bookkeeping systems and ensure timely management accounts.