Tax Treatment of Initial Franchise Fee

Tax Treatment of Initial Franchise Fee

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I have been researching what the tax treatment of my initial franchise fee will be. Franchsior has not split this into any capital/revenue elements but I can ask for this.

 

HMRC elude to it possibly being an allowable deduction based on the amortisation charged annually (https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim35501) but state that the initial franchise fee cannot be included as a deduction when calculating taxable profits on another (https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim57620).

 

I trade under a limited company.

 

Is anyone able to offer any clarity please?

Replies (17)

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By Cylhia66
23rd Jun 2024 08:53

.

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By David Ex
23rd Jun 2024 11:15

Why have you not engaged an accountant? It’s apparent from your questions that you would benefit from having a professional advisor. Who prepares your statutory accounts, payroll and tax returns?

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Replying to David Ex:
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By BusinessOwner0123
23rd Jun 2024 11:44

Thanks for your reply. I was of the understanding that this was a forum to ask these kind of questions where people joined to help others. I don't think my questions are unreasonable, but now see that this is a forum where the same answer is given to all questions and that the days where people helped each other are gone. If you are willing to offer some advice, your time will be much appreciated.

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Replying to BusinessOwner0123:
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By David Ex
23rd Jun 2024 11:49

BusinessOwner0123 wrote:

Thanks for your reply. I was of the understanding that this was a forum to ask these kind of questions where people joined to help others. I don't think my questions are unreasonable, but now see that this is a forum where the same answer is given to all questions and that the days where people helped each other are gone. If you are willing to offer some advice, your time will be much appreciated.

Which part of the site owner’s terms and conditions lead you to believe that it’s a resource for people who need professional advice but don’t want to pay for it?

https://www.accountingweb.co.uk/any-answers/how-to-use-any-answers

“If you intend to plan a course of action based on what you read in here, you should instead be taking professional advice.”

“They are not here to provide free accounting advice.”

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Replying to David Ex:
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By BusinessOwner0123
23rd Jun 2024 12:05

Your reply is a good example of copying what you want to, but not everything. You could have copied the following:

Users are free to seek clarification for technical issues that are troubling them.

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Replying to BusinessOwner0123:
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By BusinessOwner0123
23rd Jun 2024 12:37

It's actually quite similar to asking for advice in these two posts:

https://www.accountingweb.co.uk/any-answers/flat-conversion-allowances-c...

https://www.accountingweb.co.uk/any-answers/inheritance-tax-what-counts-...

I could accept your reluctance to offer any assistance if I had done absolutely no research. But as you can see from the original post, I have spent time looking into it and am seeking clarification.

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Replying to BusinessOwner0123:
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By paul.benny
23rd Jun 2024 12:56

We can all cherry pick but, with every respect, it seems to me your questions are closer to seeking free advice than technical clarification.

In your scenario, as is often the case, the answer is that it quite possibly depends on the detailed wording of the franchise agreement and what exactly the franchisor is providing as part of the agreement, both on day one and periodically thereafter.

This may be a matter where there different treatments are possible and which may in turn affect your overall tax liability or the timing of tax payments. The accountant that you seem determined not to hire can consider matters such as this.

Reading HMRC manuals is akin to consulting Dr Google. Yes, they will provide a an answer but it's experience and broader context that enable the practitioner to distinguish a migraine from brain tumour.

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By Leywood
23rd Jun 2024 11:17

BusinessOwner0123 wrote:

Is anyone able to offer any clarity please?

Yes, for a fee.

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Replying to Leywood:
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By BusinessOwner0123
23rd Jun 2024 11:45

It may be more useful it you elaborate and provide contact details and a proposal for your fee..

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Replying to BusinessOwner0123:
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By FactChecker
23rd Jun 2024 15:35

You're missing the point, which to be fair has not been set out expressly:

* Any useful answer to the kind of questions you are asking is going to require quite a lot more information about your personal circumstances (and objectives), which in turn will often uncover further questions needing to be answered.
* That kind of detail is not appropriate (from your perspective) for publishing on a public forum - and can take an hour or more to establish even face-to-face.
* Any professional you wish to appoint must carry out certain tasks before being allowed to give direct advice (and these take time and cost money).
* The combination of these factors means:
(a) that you won't get useful general advice from a public forum (at least not from professionals as opposed to keyboard warriors enjoying themselves); and
(b) that a professional may not be interested unless there's a long-term need for their continuing services (or a one-off of great complexity and therefore a high bill).

The purpose of the site, if you're still wondering, is intended to provide a place where professionals (practitioners if you will) can exchange views, opinions and indeed questions - but in the latter case only where they already understand the topic and have researched an aspect without achieving clarity, so are now seeking input (not advice) from fellow professionals.

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Replying to FactChecker:
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By BusinessOwner0123
23rd Jun 2024 17:08

I really appreciate your useful reply and the time that you have taken in writing it, thank you.

Your feedback is taken onboard.

I think your comment about keyboard warriors is right!

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Replying to FactChecker:
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By accountaholic
24th Jun 2024 13:38

Isn't the forum for "anyone with an interest in accountancy to ask questions"? The OP seems to me to fit that description.

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Replying to accountaholic:
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By Cylhia66
24th Jun 2024 14:05

accountaholic wrote:

Isn't the forum for "anyone with an interest in accountancy to ask questions"? The OP seems to me to fit that description.

Personally I see a difference between having an interest in accountancy in general and having an interest in your own company accounts.

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Replying to accountaholic:
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By FactChecker
24th Jun 2024 14:07

... only in the sense that almost anyone could fit that description (depending on how deep and how long-lasting is that 'interest') - but then you know you've carefully selected the 1st sentence of a comprehensive set of 7 bullet-points and therefore are quoting it to give an incorrect summary of the whole "What is Any Answers for?"

I've no problem with anyone posting here ... but it is rather boring (for me and others including yourself) to have to keep re-iterating things that only need saying to a non-practitioner - in particular the last 2 of those 7 bullet-points.

FWIW it appears that OP had no issue with my explanation.

EDIT: I see that Cylhia66 has provided a far more succinct riposte!

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DougScott
By Dougscott
23rd Jun 2024 16:48

I can't believe that you already have a limited company but do not have a professional advisor? I think all serious business owners would hire professional advisors and not try and DIY it.

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Replying to Dougscott:
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By BusinessOwner0123
23rd Jun 2024 16:54

Really useful reply, thank you.

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Replying to BusinessOwner0123:
DougScott
By Dougscott
23rd Jun 2024 22:17

But really why do so many people, particularly franchisees, go bust? Often it's because they haven't a clue how to run a business and don't take proper advice. All serious businesses will have an accountant.

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