Franchise advise please

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT member discussion
Hi there all

I have been contacted by a potential client who has bought a franchise for an eco-cleaning business. I have only ever dealt with sole traders, partnerships and limited liability partnerships. Can anyone tell me if there are any special treatments for accocunting for a franchise? Is it simply crediting the capital account with the amount paid for the franchise? Any other advice would be welcomed in dealing with this entity.

Just realised, how sad am I emailing this website at 6.00pm on a Friday night :?
What happened to my days of partying :shock:
Thanks
Siany

Comments

  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Franchise advise please

    Hi Siany

    Where are you based? It is now only half five here in sunny east anglia :D

    I have never dealt with a franchise before, but have read somewhere that you cant depreciation the capital costs, but can all the materials, training etc. If the initial, say £20K included an amount for the "other stuff" this needs to be broken down, so it can be accounted for properly.

    Try phoning the franchisee/or (seller :oops: ) and ask them.

    Also you need to see the wording of the agreement - it may be that they have to give a certain percentage of their turnover back the (I wish I could remember whether it was ee or or!).

    Try searching on www.accountingweb.co.uk as there have been various posts on there about franchises.

    Claudia
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Franchise advise please

    I have found that there is special tax treatment of a franchise - you need to check that it falls under schedule 29 (there are a lot of rules - check the Inland revenue website) and if it does the amortisation is allowable for tax over the franchise life. I would double check everything with the revenue but I got caught out on this and had to resubmit a corporation tax return because of it!!

    Feel free to pm me if I can help any further.

    Annette
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Franchise advise please

    Oops read the clock wrong. I think it's time I had a rest from the pooter now!

    Excellent advice from the both of you. I will certainly check the HMRC website. A little concerned about the special rules there. Basically, I am only doing the bookkeeping side of things as this was a recomendation from an accountant who passes work on to me that he a: can't be bothered with or b: it is a dissorganised client with a carrier bag of receipts which he has no time for :D Either way I would like to know as hopefully I will gain clients through my own efforts and would like to have answers for any arising queries.
    Thanks again both
    Siany
  • System
    System Posts: 100,534 🤖 Admin 🤖
    Re:Franchise advise please

    Hi Siany

    Is the referring accountant still going to do the final accounts and tax work? It might be worth asking him / her about the best treatment for these entries. He might already have told the client how it will be dealt with, and if this accountant is going to use your books to do final accounts, there will have to be agreement between the two of you as to the best treatment.
    I do the books for a franchise, the original investment is amortised. The client has actually used this franchise business as a spring board for other things. They now put only a very small amount of work through the franchise and have set up a separate limited company for the more lucrative work. This way there is less cream for the franchisor (or ee - cant remember either :oops: )
    Two clients for the price of one! :D

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