With the beginning of what absolutely will show an eventful yr, Chris Bond, tax associate and head of motor retail at BDO UK, takes a take a look at the important thing points motor retailers ought to deal with throughout 2024.
1. Verify banking covenants
Banking covenants, the foundations overlaying finance, may trigger some administration complications within the coming yr. As rates of interest have risen, together with enterprise prices, and as income ease – in comparison with current years – this might imply the ratios between the 2 are outdoors the acknowledged guidelines of a mortgage settlement. Banks embrace these covenants in agreements equivalent to debt service cowl as an early warning system. It is unlikely this may pressure any enterprise closures, nonetheless, being outdoors the banking covenants may imply banks will take the prospect to renegotiate and probably improve charges.
CFOs ought to preserve a detailed eye on these ratios. A great administration staff might be modelling completely different eventualities as much as six and even 12 months out to verify every little thing is inline.
2. Put together for Making Tax Digital
Making Tax Digital is shifting to its subsequent stage and can quickly prolong to company tax. It’s prone to considerably influence small to mid-size motor retail companies as they transfer on from digital VAT submitting. The digital transformation streamlines tax reporting and requires companies to take care of exact and up-to-date monetary information and should change tax fee schedules, probably bringing them ahead and making them extra frequent. This can lead to cashflow cycle adjustments.
Retailers ought to speak to their accountants as quickly as potential to plan for the change.
3. Plan for brand new property accounting guidelines
All firms should report property on their steadiness sheet ranging from the reporting interval following January 2025. Presently companies simply report the quantity of hire, not the property valuation. All leased properties should be recorded on a enterprise’s steadiness sheet.
For these teams which have plenty of leasehold, that is a big change. And the steadiness sheet will look very completely different as it is going to improve the asset and legal responsibility base of an organization.
Enterprise leaders and CFOs might want to assess how the adjustments will influence revenue metrics and the aforementioned banking covenants.
In addition to the work calculating the worth of the property prepared for 2025, accountants should work out if companies might want to restate their 2024, and probably, 2023 figures.
4. Have interaction with advisors
Retailers who presently use the identical auditor and tax/advisory supplier might want to contemplate upcoming laws that requires using separate entities for every position.
Modifications in regulatory limits based mostly on turnover, steadiness sheet measurement and workers numbers might require companies to segregate their audit and advisory companies between completely different suppliers.
It’s probably that this variation will influence teams with over £500m turnover and so now’s the time to domesticate relationships with numerous completely different suppliers to make sure greatest worth.
5. Be agile on company
With the complete landslide of producers but to undertake company, retailers might want to preserve a really shut eye on every model’s plans for his or her community. Not solely ought to retailers take heed to their OEM’s communications on a shift from franchised to company gross sales, however to additionally look additional down the road at what a change in settlement may imply to general community sizes.
These manufacturers promoting company usually counter the decrease margins on supply with better quantity and better effectivity. For the OEM, that may be achieved by fewer retailers and fewer teams operating the remaining community factors and so retailers ought to preserve all of their choices open.
6. The longer term panorama for the sale of EVs
The ban on new petrol and diesel automobiles might have been moved again 5 years to 2035, however the Zero Emission Car Mandate stays in place and stipulates a 22% combine of electrical automobiles in 2024 rising steadily to 80% by 2030. Vans now have a goal of 10% in 2024 rising to 70% by 2030. Whereas the penalties, £15,000 per car outdoors the goal, might be lodged in opposition to producers, retailers will probably be focused on EV gross sales to an excellent better extent in future.
Whereas there could also be little method spherical this, retailers will want to verify they’re not mis-selling EVs to safeguard in opposition to future repercussions or challenges.