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69 Sinclair Street
Helensburgh
Argyll & Bute
G84 8TG

Tel: 01436 671477
Fax: 01436 674410
email: info@hammondca.co.uk

CASE STUDIES

We recently helped one of our clients, a social club, to turn around its finances and make a profit from its bar and gaming machine income.

The last year that a profit was generated was 2000.

We have been preparing accounts for the club for a number of years and had pointed out by correspondence and telephone calls on an annual basis that the situation was unacceptable and that bar prices would have to increase to a more realistic level in order to cover bar wages and generate profit.

We pointed out that their prices were considerably less than the club’s competitors and there was scope to increase prices without the fear of losing members.

Although there was some improvement after our calls the maximum gross profit % that was achieved was 45% which was still not enough.

We had a meeting with the committee and advised them that if the bar prices were increased by 5%, this would generate sufficient income to cover the running costs of the club and that if no action was taken the club would not be able to continue to trade.

The club has now raised its prices and is going from strength to strength. 

Recently we were approached by a new client who advised us that he had not been given any advise about tax planning and that all his previous accountant had done was to prepare accounts.

We looked at his management accounts for the first nine months of his accounting year and on that basis calculated his profit and tax liability for the year.

We asked him whether he had any plans to purchase any plant and equipment for his business and he advised us that he was considering purchasing a new lorry at a cost of £60,000.

We advised him that if he purchased the asset prior to the end of his financial year he would be entitled to Capital Allowances of £24,000, a saving in Corporation Tax of £4,560.

We are often asked by clients the best way to finance the purchase of a new vehicle. There are three ways: Purchasing for cash or bank loan; Hire purchase and Lease.

Our advice is usually that purchases made by cash or bank loan means the vehicle is theirs and if used for business purposes there are Capital Allowances of 25%(maximum £3,000) with a restriction for private use.

Hire purchase – means the vehicle belongs to the finance company until the final payment is made but capital allowances can still be claimed.

If the vehicle is leased only lease payments against profits can be claimed although there is a restriction if the vehicle’s cost is in excess of £12,000. The lease payments are also subject to VAT any business would have to be registered to make this a viable proposition.

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