Hi Guys i am seeking some help with regards to a Franchise and hoppeing one of you my just have the answer i am looking for i have a client that has purchased a Franchise from his own funds at a cost of £10.800 i have enterd transaction in to the accounts as a fix asset and put a credit in to his capital account the Franchise is for 5 years. But he can sell it at anytime i was at first of the understading that it would come to an end after the 5 years and was looking at Depreciation over that 5 years . However i am now told that it wont only the support and the ues of the logo will and the Franchise will still be his and he can continue to pay a monthly fee for the support . so am i right in thinking that there would be no Depreciation and just keep it in the accounts as it is .Also would the Franchise come under the Capital Allowances his start up was October of this year and he is a sole trader i have looked up on Franchise and with HMRC and have to say it is as clear as mud to me lol so any help would be great Thanks MartynEdited at 02 Dec 2011 11:49 AM GMTEdited at 02 Dec 2011 11:51 AM GMT
My understanding and the way that I have dealt with a franchise in the past is to write the cost off over the initial period of the franchise agreement ie 5 years.Not being an expert in tax but I believe that it is not allowable for capital allowance purposes. But will be offset against capital gains should it be sold. This need will need to be confirmed with an tax expert.It might be worth looking at the original invoice as there may be items included that would attract Capital Allowances. Also have you looked at any VAT element?
Hi Adrian Thanks for your reply he is not vat at this time so are you saying i need to do the Depreciation on it over the 5 years this would be £ 2160 per year i was just thinking that as he has it for as long as he wonts it it would go up in value but then when you look a Property there is Depreciation of 2% on that and that would go up in value
As far as I am concerned I would certainly straight line it over the 5 years.Whilst I appreciate your comment over the fact that he has it until he wants to give it up, technically it is only for 5 years.Edited at 02 Dec 2011 06:11 PM GMT
