NEWS
• Average House Price: 9 June £297,508 August £304,116 – Zoopla
• More FTB Mortgages issued in June since 2007
• First time buyers make up 47% of the market in Q1 2016 – 154,200 Deposit is £33.960 up 14%.
• BTL arrears falling after Brexit 9,300 Q1 2016 to 6,600 in Q4
Top Buy to LetMortgages
• TMW: 2.49% 2 Year Fix 75% LTV
• B Mids: 2.84% 2 Year Fix 75% LTV
• KENT REL: 4.99% 2 Year Fix to 85% LTV
• VIRGIN: 2.54% 2 Year Fix 75% LTV
• MORT TRUST: 2.80% 31/01/18 75% LTV
• COVENTRY: 3.29% 2 Year Fix 75% LTV
Top Long Term BTL
• BMSols: 3.29% 5 Year Fix 75% LTV
• VIRGIN: 3.48% 5 Year Fix 75% LTV
• Coventry: 3.19% 5 Year Fix 65% LTV
BRIDGING & DEVELOPMENT
• Typical 70-75% LTV x Purchase Price
• Arrangement Fees 2%
• Monthly Interest from 1%
DEVELOPMENT FINANCE:
50% x GDV
100% x Build Cost in Stages
50-60% x Purchase Price
Please contact Rory to discuss the information in this blog.
When you carryout out a refurbishment or Fit Out of your business premises you will be entitled to Capital Allowances.
Here is quick summary of the main types of allowance.
Business Premises Renovation Allowances
BPRA gives incentives to bring back into business use derelict or business properties that have been unused for at least one year. It gives an allowance of 100% for certain expenditure you incur when converting or renovating unused business premises in a disadvantaged area.
BPRA started on 11 April 2007 and ends on:
• 31 March 2017 for Corporation Tax
• 5 April 2017 for Income Tax
To qualify for BPRA, you must incur qualifying expenditure.
Qualifying expenditure is capital expenditure you incurred when you:
• convert a qualifying building into qualifying business premises
• renovate a qualifying building that is, or will be, a qualifying business premises
• repair qualifying business premises
Capital Allowances
Integral features
Integral features are:
• lifts, escalators and moving walkways
• space and water heating systems
• air-conditioning and air cooling systems
• hot and cold water systems (but not toilet and kitchen facilities)
• electrical systems, including lighting systems
• external solar shading
Fixtures
You can claim for fixtures, eg:
• fitted kitchens
• bathroom suites
• fire alarm and CCTV systems
You can claim if you rent or own the building, but only the person who bought the item can claim.
Annual Investment Allowance
The Allowance is set at up to £200,000 from January 2016
You can only claim AIA in the period you bought the item.
The date you bought it is:
• when you signed the contract, if payment is due within less than 4 months
• when payment’s due, if it’s due more than 4 months later
If you buy something under a hire purchase contract you can claim for the payments you haven’t made yet when you start using the item. You can’t claim on the interest payments.
If you don’t want to claim the full cost, eg you have low profits, you can claim part of the cost as AIA and part using writing down allowances. You can do this at any time as long as you still own the item.
If your business closes, you can’t claim AIA for items bought in the final accounting period.
Enhanced Capital Allowance
100% capital allowances can be obtained for expenditure on environmentally beneficial technology. This enables businesses to write off the whole capital cost against their profits in the year in which the expenditure is incurred and therefore to obtain valuable tax relief which can improve cashflow.
What doesn’t count as plant and machinery
You can’t claim capital allowances on:
• things you lease – you must own them
• buildings, including doors, gates, shutters, mains water and gas systems
• land and structures, eg bridges, roads, docks
• items used only for business entertainment, eg a yacht or karaoke machine
New Tenant – Lease Incentives
New Tenants may get incentives such as rent free periods or reverse premiums. The new accounting rules (FRS102) mean that these incentives are spread over the life of the lease not taken over the period to the first rent review. Spreading these savings out will mean that tenants get a tax advantage as the gain will be less at the beginning of their lease.
Fit Out Finance
Generally funding fit outs is an issue due to the nature of the security.
As the name suggests, Fit-Out Finance is dedicated to funding fit-outs of business premises, including:
• Head Office.
• Warehousing.
• Fast food outlets.
• Restaurants/retail premises.
• Showrooms.
Using a blend of hire purchase, lease, unsecured loan and other facilities where appropriate, we are able to fund not just the tangibles, but all manner of tertiary work, from survey through to painting and plumbing.
As previously noted HP and Loans are suitable for tax relief through Capital Allowances.
Here are a couple of examples of how funding can work.
Start Up Fast Food Outlet
Well researched & professional, our client was buying into a well-respected fast food franchise.
Their bank had supported the franchise purchase, but there was a further £75,000 required to fit the premises to franchisor specification.
With the customer’s background and a solid franchise, arranging leasing on equipment was fairly straight forward.
That left a £30,000 shortfall on less tangible works – as there were 2 owners in the business, we were able to secure Start-Up loans to fund the shortfall
A Warehouse
The client was a well established, profitable hirer of electrical equipment. Despite being profitable, the business was highly seasonal and therefore cashflow fluctuated wildly.
Most of their funding was done under their roof, being shared between the bank, and the bank’s own finance company, who handled their hire stock.
However, when they approached the finance company, they were confidently informed that racking and mezzanine floors couldn’t be financed; hence they ploughed on, pouring valuable cash into fixed assets.
They had spent over £100,000 on racking etc and were struggling with cashflow to complete the project.
The Funder was able to:
• Release the full value of the assets they had paid for.
• Provide ongoing further funding for a mixed bundle of assets, ranging from a mezzanine floor to bikes used to move around the facility efficiently.
• Provide a £35K term loan to cover intangible costs.
If you have a Business and you want too borrow money, you will probably be asked to give a Personal or Directors Guarantee.
Most Directors don’t want to give guarantees as it makes them liable rather than their business and the purpose of having a limited company was to limit their personal liability.
So it’s a common dilemma.
What can you do to reduce your risk?
Would you be prepared to pay a higher rate of interest? there are are lenders who for an increased rate will agree not to ask for PG’s or DG’s
If you aren’t prepared to give a guarantee you should make this clear upfront with the potential lender, it will save time and money.
Limit the terms of the Guarantee – don’t let the guarantee be unlimited or unconditional
Agree terms for relief – for example when a % of the debt has been repaid
Decrease the Guarantee if the business achieves specific goals, for example a target net worth
Set rules for when the Guarantee can be called on for example when a set number of repayments are missed
Avoid ‘Joint ans Several’ Guarantees as not all business owners may have equal shares
Avoid co-signing by Spouses
Avoid using your main residence in the guarantee
Consider whether Personal Guarantee Insurance could be obtained and used
What are the benefits of Personal Guarantee Insurance in more detail?
It allows directors to balance their risk evenly, so that no one director is taking on all the uncertainty of guarantees being called upon in the future
It can provide the incentive needed to grow the company by borrowing essential monies
This type of insurance is flexible, and can be increased if necessary as your business grows
Personal Guarantee Insurance provides peace of mind to directors that the full value of their personal asset is not at risk
Start-up companies have access to funding that they might not otherwise be comfortable taking on
Sometimes even the best ideas don’t get funding at first….
But if you have the right strategy you can still succeed, that’s why a business plan is really important
Approximately a third of all SME’s in the UK don’t have a Business Plan, that’s about 1.5m businesses, so if you don’t have one, here are some reasons why you should prepare one….
Research by Exact Software shows that SME’s with Business Plans make 20% more profit
Having a business plan doubles your chances of increasing profits, increasing revenue, attracting new clients
A well-researched business plan which includes the right figures and realistic forecasts will reassure potential investors you are a sensible investment opportunity
A Business Plan will help you set out and achieve your goals
It will help you set goals for your managers and staff
The Business Plan will help you plan your cash flow and forecast Capital Expenditure
A Business Plan will help you secure Business Finance and Loans
You can plan your succession strategy or prepare the business for sale
A Business Plan tests the feasibility of your business idea
It will help you plan for the recruitment of Staff
A grant is an amount of money given to an individual or business for a specific project or purpose.
You can apply for a grant from the government, the European Union, local councils and charities.
Advantages include:
you won’t have to pay a grant back or pay interest on it
you won’t lose any control over your business
Financial assistance in the form of grants is subject to the normal taxation rules, as supplemented by S105 Income Tax (Trading and Other Income) Act 2005 and S102 Corporation Tax Act 2009 (see BIM40465). Under normal rules the tax treatment of grants will depend on whether they are capital or revenue.
Revenue grants
Grants which meet revenue expenditure, such as interest payable, are normally trading receipts.
See also Smart v Lincolnshire Sugar Co. Ltd [1937] 20TC643 and Burman v Thorn Domestic Appliances (Electrical) Ltd [1981] 55TC493.
Capital grants
Grants which meet capital expenditure are normally not trading receipts.
Grants that may be capital in nature include those paid to acquire capital assets or to facilitate the cessation of a trade or part of a trade.
See The Seaham Harbour Dock Co. v Crook [1931] 16TC333).
A capital grant reduces any qualifying capital expenditure for capital allowance purposes, see CA14100.
Finding ways to fund your business can be a challenge so hear are some business models where your customers provide the funding.
Subscribers
This can apply to many situations ranging from Networking and Memberships to Sky TV or Microsoft Office 365, get your clients hooked on paying a monthly or periodic payments and it should work wonders for your cash flow.
High Demand
Any product in short supply creates a situation where clients are prepared to pay now in order not to miss out, here is an example:
Microsoft unveils its new Xbox One console Friday, one week after the release of the rival PlayStation 4.
Microsoft says the supply of the new $499 consoles is its biggest ever. But with record pre-orders — more than double those of the Xbox 360 back in November 2005 — the consoles may be hard to find.
November 2013
Pay In Advance
Often used in the home improvement market for example conservatories, kitchens, bathrooms, getting customers to pay a deposit or in some cases all the money upfront (or on finance) puts you in the best possible position especially if you can set up accounts to pay your suppliers on 30 or 60 days.
Market Place
Getting paid to bring people together is a great business model think of ebay, dating sites, or any on line market place where the owner gets paid when a deal is done.
