Tax treatment of Franchise cost


A

AC

Dear All,

Sole Trader invests in Franchise

Total fee (ex vat) is broken down into

License to operate (5yrs)
Software
Training
Consumables (office stuff)

Can someone advise as to permitted tax treatment. (Assume immediate
write-off would be best, if allowed?)

Regards
 
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T

Troy Steadman

Dear All,

Sole Trader invests in Franchise

Total fee (ex vat) is broken down into

License to operate (5yrs)
Software
Training
Consumables (office stuff)

Can someone advise as to permitted tax treatment. (Assume immediate
write-off would be best, if allowed?)

Regards
I am the triage accountant in this NHS trust, I will assess your
symptoms and if you have a genuine problem (as opposed to being "The
Interesting Question Troll") I will forward you to the appropriate
department.

THE LICENCE
The rules for the treatment of intangible assets changed from April 2002
you are now able to claim an immediate tax deduction, broadly in
accordance with the accounting treatment of those assets:

FRS10: "Purchased...intangibles to be capitalised as assets.
Where...intangibles have a limited useful economic life, they
are to be amortised over those lives.")

The licence will be written off for taxtion purposes over 5 years.

THE SOFTWARE
Quoting from:
http://www.numerica.biz/servicestaxnewswireAugust2003.asp

"Expenditure on licensed computer software may either be treated as a
deductible revenue expense or as capital expenditure upon which capital
allowances may be claimed (for small businesses a first year allowance
of up to 100% may be available on this expenditure). In the Tax
Bulletin, the Inland Revenue distinguished between software licences
acquired with regular payments and lump sum payments.

So if you paid for it as a lump sum you can write it off in the first
year, provided it is advantageous to create losses which can be carried
backwards, forwards, sideways, upwards, downwards...

[phone rings] inwards, outwards, excuse me a minute...








--
 
T

Troy Steadman

Troy Steadman said:
[phone rings] inwards, outwards, excuse me a minute...
....sorry to leave you on this trolley overnight. If you are a *real*
franchisee (which I do not believe for one minute) you might be
interested in these Inland Revenue inspectors' tuition pages [hand
over dog-eared heap of magazines], they learn franchising so they can
suss you out.

Catering - Fast Foods, Cafes and Snack Bars
http://www.inlandrevenue.gov.uk/bens/ben18.htm

Driving Instructors
http://www.inlandrevenue.gov.uk/bens/ben23.htm

Taxis and Private Hire Vehicles.
http://www.inlandrevenue.gov.uk/bens/ben25.htm

and so on. Must go [fluffs up pillows]...
 
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D

Doug Ramage

AC said:
Dear All,

Sole Trader invests in Franchise

Total fee (ex vat) is broken down into

License to operate (5yrs)
Likely to be a capital item.
Could be either revenue or capital. If the latter, Capital Allowances might
be available.
Not deductible for franchisee, but deductible if training of staff.
Consumables (office stuff)
Should be revenue.
Can someone advise as to permitted tax treatment. (Assume immediate
write-off would be best, if allowed?)

Regards
Have you considered running the franchise through a limited company?
 

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