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A restaurant business does not succeed on rave reviews or full houses alone. Having enjoyed a boom in previous years, the year 2018 saw a peak in restaurant closures in London, despite many of them enjoying strong financial backing, steady patronage and buoyant spending. This is why a restaurateur needs all the advice and assistance they can get.

Tax Agility: the accountants for restaurants

In many media interviews, we are too often treated to portrayals of chef-owners as people motivated solely by a passion for food and a dream of owning a restaurant. The romantic notion that a restaurant business can be sustained by creativity and hard work, with little concern about the numbers has become a common myth. Perhaps accounting does not make for good television, but businesses live and die by figures, and restaurants are no exception. This is why Tax Agility has taken on the mantle of London’s restaurant accountants, specialising in the food and beverage (F&B) trade, so that restaurateurs can focus on their task of running the gastronomic aspect of the business.


Intricacies of restaurant taxes

Like any other business in the UK, restaurants are liable for a number of taxes and mandatory contributions. However, the F&B trade has its own idiosyncrasies that only a dedicated accountant for restaurants like Tax Agility can navigate expertly. These include the ‘Tronc scheme’, which is a payment arrangement for the hospitality industry where employees receive tips and gratuities. Income tax and national insurance may be payable on a tronc, depending on certain conditions. Value added tax (VAT) for restaurants could also be highly variable, depending on whether the food or drink items are zero or standard rated, consumed in-house or takeaway.

Restaurants also pay business rates, which are a property tax levied in proportion to rents. In London’s case, this has risen sharply owing to the capital’s high property prices and 7,100 restaurants are estimated to have paid an additional £42.7m in 2017-18.

Major restaurant expenses

Restaurants have expenses that are particular to the industry, and a specialised restaurant accountant such as Tax Agility can advise the owner on how to keep the costs under control:

  • Premises – These include rent or lease costs, service charges, business rates, waste management, pest control and building insurance. In more expensive cities like London, competition has driven up rental costs, forcing entrepreneurs to get creative with their choice of premises to include converted shipping containers and a double-decker bus. Your accountant may also remind you to make sure as much of the space as possible is used to maximise sales. For example, a large basement might be great for storage but it’s not cost-efficient if it just stores more tables and chairs. As you’ll still need to pay for that storage space, take advantage of it by turning it into a profitable and lucrative dining area.
  • Food and drink costs – A general rule of thumb for buying food is to ensure it is 35% of the sale price and 15 – 20% for drinks. After the Brexit vote in June 2016, restaurant owners serving food and wine from Europe struggled against rising import costs as the pound depreciated against the Euro.
  • Staff wages – These are likely to be the largest part of overheads. You should try and keep staff costs to less than 50% of the total overheads. In April 2017, an increase in the minimum wage (now known as National Living Wage) to £7.50 / hour for over-25s raised minimum staff costs for over-25s by nearly 30%.
  • Legal and compliance – You are responsible for public and employee liability insurance, stock insurance, buildings and contents insurance. There will also be alcohol licenses and an A3 planning license to serve hot food on the premises.
  • Refurbishment and refit – For a restaurant, your priority should be: front of house which refers to the façade and the dining area, the restrooms and back of house which includes the kitchen and equipment.

What Tax Agility can do for the restaurateur

As an experienced London accountant for startups and restaurants, Tax Agility can offer new restaurant entrepreneurs many essential services to let you keep your focus on the core restaurant business including:

  • Assessment of your financial requirements, including advice on finance sources, introductions to banks and preparation of the necessary proposals
  • Advice on the most suitable structure for your business – sole trader, partnership or limited company
  • Advice on tax efficient investment structures such as the Enterprise Investment Scheme (“EIS”) and the Seed Enterprise Investment Scheme (“SEIS”)
  • Preparation of your business plan, cash-flow projections, budgets, and trading forecasts
  • Completion of registration with Companies House and HM Revenue & Customs
  • Management of company secretarial services
  • Advice on setting up financial, management and record-keeping systems in compliance with statutory requirements

If you need help with managing your accounting responsibilities, call us today on 020 8108 0090 or send us a message via our Contact Form.

Read our blogs on how Tax Agility can help your restaurant business here: