Tax Efficient Profit Extraction

Tax Efficient Profit Extraction

On Wednesday 22nd May, WMT Corporate Tax Director, Victoria Nicoll hosted an interactive session on ‘how best to extract profit from your business’. This included a round-table discussion on how to apply some general principles to different scenarios, businesses, and shareholder groups.

During the session, we looked at the age-old question of ‘salary vs dividend’ from multiple perspectives – taxation (of course!) as well as the commercial, financial, personal, and longer-term consequences of choosing the ‘correct’ combination of the two forms of income.

This led to an interesting discussion on the (often under-used) company pension contributions to personal pension plans as well as how the use Tronc schemes can factor in your profit extraction approach. We talked about benefits in kind, loans (both ways), expenses and use of personal assets amongst other things.

These informal sessions are a great way to learn about the practical and technical issues you and your business may face, with the additional benefit of learning from real-life examples. They are also a great opportunity to ask questions about how you can apply general principles to your particular situation or business.

For advice on extracting profit from your hospitality business, contact WMT’s Victoria Nicoll by calling 01727 808204 or by emailing victoria.nicoll@wmtllp.com.


National minimum wage – are you sure your hospitality business is compliant?

National minimum wage – are you sure your hospitality business is compliant?

National minimum wage – are you sure your hospitality business is compliant?

National minimum wage – are you sure your hospitality business is compliant?

National Minimum Wage (NMW) enforcement activity by HM Revenue & Customs has reached new levels. During 2018, only offshore tax avoidance enquiries exceeded those into NMW compliance, resulting in many businesses facing lengthy and costly reviews, fines and large repayments to workers.

Often, such employers have inadvertently made ‘technical breaches’ or fallen foul of a changed interpretation of the rules. Nonetheless, more than 600 employers were publicly named and shamed named in 2017/18 for owing millions of pounds to over 200,000 workers.

Leading hospitality businesses such as Wagamama, Marriott and TGI Fridays found themselves at the top of the ‘name and shame’ list, facing adverse publicity and comment. If large organisations with extensive resources can make mistakes, anyone can.

Why is our industry a target for NMW enquiries?

The way in which staff earnings are paid – basic pay which counts towards NMW income, and tronc, tips and gratuities which don’t – makes many businesses in the sector vulnerable to what may seem very minor technical mistakes or misunderstandings.

With NMW the devil is in the detail, as others have found out to their cost. You can easily put yourself at risk if you aim to pay at or above the NMW rates. This is true for staff paid hourly or for those who are salaried whose basic rate is designed to match NMW levels.

Remember, it’s easy for a current or former employee to complain to HMRC – and the onus is on you to disprove their allegation, not the other way around.

Are you at risk?

If your answer is ‘yes’ to any of the following questions, you urgently need to review your processes:

  1. Do you keep time records for hourly staff, but not for salaried staff?
  2. Do you record clocking on and off times, but not break times?
  3. Do your contracts for salaried staff fail to explicitly state the number of basic hours they are expected to work in a year?
  4. Do you pay your salaried staff on a fortnightly or four-weekly basis?
  5. Do you ask staff to supply (or cover the cost of) clothing they wear as part of a dress code (e.g. white shirt, black shoes)?
  6. Does a worker ever take a trial shift that you do not pay them for (eg a failed trial shift)?
  7. Do you charge your live-in staff more than £49 per week for rent and/or bills?
  8. Do your staff pay deposits for uniforms, locker keys, swipe cards and similar items?
  9. Do your staff buy goods and/or services from you that they pay for via the payroll?
  10. Do you have a salary sacrifice scheme in place for workers on NMW?

How we can help

If any of these questions have left you concerned, we can help.

Whether you just have a few loose ends to tie up, need to make some changes to become NMW compliant, or are in the middle of an HMRC investigation, our experienced team will provide the help and support you need.

Contact us on 01727 838255 or at hospitality@wmtllp.com to arrange a free initial discussion.


Alliance of Independent Restaurants

Chains are a threat to London’s vibrant small restaurants

Chains are a threat to London’s vibrant small restaurants

Alliance of Independent Restaurants

WE READ your recent article with interest [“London nearly at ‘peak restaurant’ as closures reach an all-time high”, November 7] .

London is a gastronomic success story that rivals any capital city but we agree that there are now almost too many restaurants vying for trade.

Every business in any commercial sector takes its chances in the economic survival of the fittest. We are now seeing unprecedented levels of restaurant closures but not simply because of sheer numbers.

Over-expansion and risky borrowing has seen off some well-known high-street chains. Each closure has been documented by the media but we mourn the loss of the many small independent businesses that do not warrant newspaper inches.

Such restaurants have not closed due to excessive expansion or negligent management but because of ever-increasing rents, extortionate rates and spiralling raw-produce costs — costs forced up by scale-hungry chains prepared to pay ridiculous premiums to dominate high streets.

The fabulous culinary success of this city is built on the hard work and creative spirit of the independent operator. Every chain started with a single shop. We urge London’s diners to support the independents.

Paul Merrett
Alliance of Independent Restaurants

Editor's reply

Dear Paul

THE rise in restaurant rents and business rates — Philip Hammond’s recent gesture towards small operators will not impact usefully on the sector — not to mention increased staff costs, mandatory pension schemes plus competition in hiring arising from the prospect of Brexit, are not helpful to the restaurant business. It always will be a tough market where a profit margin of 10 per cent is viewed as an acceptable result. Probably a certain amount of schadenfreude infects the news around the demise of over-exuberant groups and chains but well managed they serve a purpose.

Independent restaurants reap the rewards of an ingrained eating out habit and definitely benefit from the chatter that arises on social media. My reviews mention seven or eight independent ventures every week.

Readers do support independents. They queue around the block to get into the latest thrill ride.”

Fay Maschler
Restaurant critic

This article originally appeared in the Evening Standard.