Against my better judgement, I have recently taken on a restaurant client. The owners live on the premises. I wonder if there is a generally accepted formula for calculating private use of bills issued for the premises, particularly rent, gas and electricity. The previous accountants made no such adjustment so I can't crib from that and I don't have prior experience of the trade to fall back on.
All comments welcome. Many thanks.
Replies (7)
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I plumped for:
Food and drink on a sample basis.
Property expenses (heat, light, rates) say 10%, dependent on floor area etc.
sounds about right
I generally go for:
1. A fixed weekly amount on "Goods for own use" based on number of folk in family.
2. Electric, gas, heating oil, rates, mortgage interest based on floor area unless bills are split.
Electric and gas
bills tend to be VERY high in the resteraunt industry so ensure the private element reflects that.
As far as food goes, I would keep the figure low as they probably eat the "leftovers" to a degree rather than binning them. Are they a company or partnership? (I suspect partnership as no doubt p11ds and living accomodation would be a bigger issue) That could affect food if available to all staff......
Agreed
I agree, sorry. The best estimate of actual usage is the appropriate % for gas and electric.
not on sq footage
As ding dong stated the restaurant will have disproptionately high expenditure per sq footage on electicity, gas and rent.
Ihave two restaurant clients and I did a reasonableness exercise. I am married with 3 kids. My electicity is......and built up a monthly figure. One client was subject to an aspect enquiry and Inspector thought approach was reasonable.
I think as long as reasonable will be accepted. You are correct to raise it with Client because this is an area that they will look at in over the shop businesses
Separately metered supplies?
As things stand your client will be being charged 20% VAT and climate change levy on all the fuel bills. The VAT can be recovered on the business element, but the climate change levy is irrecoverable.
If the domestic supplies were separately metered, you'd only suffer VAT at 5% and wouldn't be charged climate change levy on those supplies. It might be worth estimating how much irrecoverable VAT and climate change levy would be saved by having the supplies separately metered.
If it's worthwhile, you won't have a problem making the apportionment either.