[gollo]

Hi to all you WC's out there. This is my first post on the site having just taken up WCleaning after being made redundant from my previous job. Have found site to be very helpful & informative. So far have got myself about 20/25 customers & am going to buy existing round to give me a platform from which to build on. The seller has introduced me to his customers so I know they exist. Should I be obtaining any paperwork or signature from him, when I hand over the payment, to say that he has sold me his round. Any advice would be  appreciated.

Gollo.

[pjulk]

Ask him for a receipt and put it down as a business expense.
And then its also in writing

I think as he has taken you round to meet his customers that you will not have to much to worry about.

Paul

[macc]

Hi Gollo.

I would suggest you pay 50% up front & balance after first clean.

How many cleans are you paying for it, i would never pay more than 3x.

Macc

[matt]

Ask him for a receipt and put it down as a business expense.


Paul

my accountant said the IR would NOT accept it as a expense, something along the lines of "your not really buying anything " as its just a goodwill payment

[matt]

my advice

get a list of the work and the prices

you have met the customers, so thats a good sign

i would try and see if the guy will let you work it with him ONCE, that way you can earn 50 % of the taking ( he can knock it off the bill ) and you will pick up advice and valuable tips

i only ever pay the rounds worth, so 500 quid worth of work it 500 quid, as the guy wants to sell, you want to buy, i have been lucky though with that

[gollo]

 Thanks guys. Paul, I will definitely obtain a receipt so that I can check with an  accountant if it can be deducted as an expense. Macca &Matt, it is a fairly small round for which I'm paying 1/3 of annual turnover so I think it's quite a good deal. I suppose the sale of a WC round relies on trust in the main but wasn't sure if it was usual practice,  when buying a round, to obtain a written undertaking from the seller that he won't revisit his customers to clean their windows.Am I being too cautious?

Gollo

[AuRavelling79]

Any work/goodwill I have bought goes down as a business expense! At the very least it's an introduction fee. Conversely, when I have sold bits and pieces of work I have put it down in the income column.

[Paul Coleman]

Ask him for a receipt and put it down as a business expense.


Paul

my accountant said the IR would NOT accept it as a expense, something along the lines of "your not really buying anything " as its just a goodwill payment

I'm wondering if you ought to consider getting a different accountant.  Surely it is reasonable to regard this as purchasing a part of a business (the customer list part).  I don't know about offsetting it all in the year you pay it as it is possible to regard it as a capital outlay (depending how you define it) but I would certainly think of it as a business expense.  I'm sure the IR would want to tax you on it if you were the seller.

[Paul Coleman]

Ask him for a receipt and put it down as a business expense.


Paul

my accountant said the IR would NOT accept it as a expense, something along the lines of "your not really buying anything " as its just a goodwill payment

I've had another thought on this too.  If say you had a business hat did mailshots, you often have to pay to get up to date lists which would be a business expense.  I feel that this has no real difference to buying a work list.

[matt]

The Shiner

im just passing on what she said

[dai]

If it were the other way around,and you sold your round for £3000.
I'm sure the tax man would like to know about it.
You try telling him that it doesn't count as income, because you were only selling good will. I'm sure his heart would bleed for you. Dai

[macmac]

my accountant told me the same, it's NOT tax deductable, cos it's goodwill that your paying for. just remember that it's YOU that is responsible for any tax issues, NOT the accountant. he only works with what you give him, so at any time in the future the IR could want some money back ( + loads of interest) if indeed my & matt's accountants are correct.

[Paul Coleman]

The Shiner

im just passing on what she said

I am surprised that your accountant gave that advice.  I will be seeing my accountant next week to finalise the books for 05-06.  I think I'll ask him about it in case there is some obscure reason why this is not a tax deductible expense.  Sounds odd to me.

[dai]

If you were to employ door knockers to help build your round,  would it be classed as an expense?
What's the difference between buying a round, and employing door knockers?
If paying for good will is not deductable, then selling it should not incur a tax liability.
Do the people that run door knockers not have to pay tax then?
A strange one this. The tax man can't have it both ways. Or can he? Dai

[pjulk]

Well if building rounds and selling the goodwill is tax free i'm giving up window cleaning and going round building

Paul

[matt]

The Shiner

im just passing on what she said

I am surprised that your accountant gave that advice.  I will be seeing my accountant next week to finalise the books for 05-06.  I think I'll ask him about it in case there is some obscure reason why this is not a tax deductible expense.  Sounds odd to me.

fair enough, it seems that accountants will let it go though, BUT if you get investigated then will the IR ? ? ? ? ?

i dont know, as i said, i was told this, as i had 2 fair sized receipts for work i have paid for

[macmac]

if it was work that had proper signed contracts from clients i.e. commercial work that guaranteed income for a set period of time i think it would then be tax deductable, cos you are buying something with proof that may be legally binding, but with a domestic round it's the good will of each customer that your buying- and thats not guaranteed nor proofed. i remember the accountant explaining something like the above to me as i was peed off i couldn't put 3k of domestic work that i'd bought down as an expense.

tony

[WavieDavie]

i remember the accountant explaining something like the above to me as i was peed off i couldn't put 3k of domestic work that i'd bought down as an expense. Huh

You've bought it, you have a receipt, it's a legitimate "cost of goods sold" - end of story.

If you paid a fee to an employment agency who supplied you with a member of staff, would your accountant not allow that as a legitimate expense? How else did they treat it, did they put it down as drawings?

[macmac]

cost of goods sold?? what goods?? read again. it's good will not goods sold.

someone shud investigate this issue, for if my accountant is indeed correct some people could find themselfs in a spot of bother, if however he's wrong, i'm gonna break his ****ing neck!!!

[macmac]

as for the agency scenario- that would be contracted, like i said read again

[KarlJones]

I have never heard the like.

Just to check I have asked one of my friends to ask at work on Monday ( I know, I mix with the wrong people )

From now on I am going to be cleaning windows at cost and add a charge for the information needed in order to do the job.

I have looked it up as much as I can, as far as I can see if you are a corperation then you can claim for goodwill. however this is not available to individuals or partnerships.

It is an intangible asset, and although their is some new(ish) areas that cover the information economy for corperations it seems to specifically rule out anyone who is not a corperation. 

I personally do not know if a sole trader can claim for a "professional service" but if he can, and he can prove that it was needed, then their is a chance he can claim it back. 

[dai]

If you were to buy 10000 flyer's, it would be a legitimate expense. But, you are only posting flyer's in the hope that you may get further work from them.
If you purchase a round, your expectations of receiving extra work are more or less guaranteed.
 I can't see the logic in refusing to allow it as a genuine expense.
I can take then that if I retire, and sell my round. Any proceeds from the sale are none taxable. Dai

[WavieDavie]

macmac,

"Cost of goods sold" is an expression, we all sell a service. I'm happy to be wrong with my terminology.

But how did your accountant treat that £3K if not as an expense? Where did it appear in your accounts, or did you just have to bite it as drawings?

[DASERVICES]

macmac / matt,

I do not know if your accountant is correct as I have never bought a round but I would liken it to buying a franchise or another business so bit confused.

What I have found always helpful the the business advisor in your local tax office, find out his mail address or put it in writing and ask the question. If you get a reply on paper then you have it as proof and the tax man cannot go back on his word.

The tax office business advisor I have found very helpful, so amy be worth a try you may never know you could get the money back.

Doug

[macmac]

wavie
the 3k might have appeard somwhere in my accounts (can't remember its 3 years ago), but the gist of it is as far as i can fathom is that because of the said situation ( goodwill & all that) it wasn't tax deductable i.e. it couldn't go down as an expense ( i think). to be honest i'm even confusing myself now
i'll try to clear it up next time i speak to him.
more importantly- lets hope the wind clears up this week, it's terrible down here in berwickshire.

[matt]

my money i paid didnt even get put on my accounts, as he said it was a "payment of goodwill" she explained it as i was just giving the people a gift for the work

if she was wrong, then i was a bit out of pocket, i didnt really care at the time, as it was my first year, and i had paid "self employed tax (used to be SC60 years ago, dont know what its called now, they tax 25 % of your money off you ) for NINE months of the year, thus they owed me tax anyway, so water under the bridge

are well, you live and learn i guess

[Paul Coleman]

I'm wondering if this is one of those situations where you should buy a squeegee for £3,000 and have a free window cleaning round thrown in.

[matt]

I'm wondering if this is one of those situations where you should buy a squeegee for £3,000 and have a free window cleaning round thrown in.

now thats a idea

the whole business for the 3K, inc tools etc etc

[WavieDavie]

I'll try to clear it up next time i speak to him.
Yes please - it was many years ago that I paid for a small round and can't really recall how it was treated, but I know I'd be jumping up and down if it didn't go through as an expense.

more importantly- lets hope the wind clears up this week, it's terrible down here in berwickshire.
I think it's all over the country! On Friday, all we did was commercial stuff and finished. We've got a block of flats  - ground, first and second - from two weeks ago which we just can't get done because of this soddin wind.

£3K for a squeegee (equipment to run a window cleaning business, M'Lud) + some goodwill (free customers thrown in) Who'll be first to try that !?

[macmac]

it gets done in the housing market ( i was told) to avoid stamp duty.buy the house for just under the threshold then make the rest up in fixtures & fittings.

[KarlJones]

I'm wondering if this is one of those situations where you should buy a squeegee for £3,000 and have a free window cleaning round thrown in.

whoooa, I wouldn't do that if I were you.  It is all about fair value and anything else is a sham.  Just to add to this debate.  Although you can not get tax rebate on goodwill if your a sole trader, you can sell it to yourself and claim tax on it.  This is what happens if you go to a Ltd company, you basically sell everything to the Ltd company including goodwill which is, in this case, tax deductable.  However it has to be fair value.   You can not just hike up the price.

I have not seen the declaratiuon form for sole traders, is their a section for proffesional fee's?

[Paul Coleman]

I'm wondering if this is one of those situations where you should buy a squeegee for £3,000 and have a free window cleaning round thrown in.

whoooa, I wouldn't do that if I were you.  It is all about fair value and anything else is a sham.  Just to add to this debate.  Although you can not get tax rebate on goodwill if your a sole trader, you can sell it to yourself and claim tax on it.  This is what happens if you go to a Ltd company, you basically sell everything to the Ltd company including goodwill which is, in this case, tax deductable.  However it has to be fair value.   You can not just hike up the price.

I have not seen the declaratiuon form for sole traders, is their a section for proffesional fee's?

When I posted about the £3,000 squeegee + free round, my tongue was planted very firmly in my cheek     .
As for the bit about ltd companies being able to offset goodwill as a tax deductible expense, would it make a difference anyway?  The less liability the ltd company has due to paying for the business, tools, goodwill etc,, the more the sole trader has to pay in tax on it (both items being your pocket anyway.
I suppose if you timed it right it may be possible but surely that would be illegal because it is too simple.  e.g.  Sole trader sells tools, business etc to his own ltd company for £4,500 in the first week of his sole trader accounting year.  Sole trader continues as a sole trader for the other 51 weeks but only makes an additional profit of about £500 pounds for that accounting year.  Tax liability £0 because he hasn't quite earned the personal allowance of about £5,000.  However, the ltd company that starts off on the day that the sale goes through can offset the £4,500 as a business expense.  It sounds good but is too obvious so I'm sure there must be a law against it somewhere.  Maybe you're not allowed to operate as ltd company and sole trader at the same time but there is no law against having more than one business.

[Templar]

Have to go with wavie Davie.
The law states that business' our size(small) should keep adequatebooksandrecords.Theseeuld be clear and easy to follow.

I would enter into my books at the time any round bought as a capital expense, and then at the end of the year include this in my profit and loss account.(It wouldn't be tax deductable because I would have already knocked it off my net profit).

However, if I just produced a bit of note paper with something like, £3.000 cost of business bought in, with no verification I would expect the revenue to ask questions. Especiallyi IfIDdIit every year. Also if an accountant is found to be lying on your behalf they can go to jail, so they tend not to stick their necks out.