Buy now or in new tax year?

sensiblekate

Hi, I posted previously about buying a franchise and whether to register as a limited company and people were so helpful. 

I decided to go down the sole trader rout and am now due to buy the franchise on 4th April. As this is right at the end of the tax year would we be as well waiting until 6th April to buy? Would this make things easier in terms of tax returns? I will not be registered as a sole trader at this point but I think there may be a benefit if I am able to list the purchase of the business as a loss for my first year?  

Also, should I make the purchase of the franchise through my business bank account (in the process of setting this up just now) so that there is evidence of where the money has come from? 

Sorry for all the questions but I am a total newbie to all things tax and business! 

MalMonroe

Hi, if it were me (and it was a while ago as I started my own small online business), I waited until 6 April, just so everything was neat and tidy where financial matters were concerned.

If it won't be disastrous or harmful or disrupt any agreement or arrangement you have already signed up to, then two days doesn't seem too long to wait. But please do check that it will not be detrimental.

I believe you will have to use your business account to buy the franchise, yes. 

Have you seen the info in the following link? 

https://www.moneyhelper.org.uk/en/work/self-employment/thinking-of-starting-up-in-business

There's a section on buying a franchise in there, as well as lots of other useful information. 

As you are a newbie to self-employment, it seems that you will need to get yourself up to speed fairly quickly if you are buying the franchise as early as next week. 

I'm not familiar with franchises as I work solely for myself, so any advice you may take from it is not intended to be construed as fact. Please do your own checking up and ensuring that you do the right thing for you and your business.

All the best and good luck with it. 

Jeremy535897

When your trade commences is a question of fact. It is normally the date when you are in a position to supply goods or services.

You will not get a tax deduction for the initial cost of the franchise. See:
https://www.franchise-uk.co.uk/buying-a-franchise-uk/franchise-fees-tax-deductible/

I doubt there is any benefit to buying the franchise on 4 April rather than 6 April. If you choose to make up accounts to 31 March, HMRC will treat the year to 31 March as if it is the year to 5 April anyway. Assuming your trade commences, or is treated as commencing, in 2023/24, you need to notify HMRC by 5 October 2024. However, you would be better notifying sooner rather than later. See:
https://www.gov.uk/register-for-self-assessment/self-employed

You should get into the habit of using your business bank account for business transactions, and your private account for non-business transactions, but it isn't a requirement.