A good Budget for coffee shop owners?

The first episode in the BBC’s Business Boomers series aired last week with the series of four episodes focusing on businesses that have boomed despite the tough economic climate. Episode one took a look at the UK coffee shop market, one in which well-known brands such as Starbucks, Costa and Café Nero dominate but where small independents also have their place to thrive.

With over 16,000 coffee shops now operating on our high streets the owner managed independents account for just over a third. In order to compete with their bigger rivals they need to be as efficient as possible on every level, know their market inside-out and take advantage of every incentive available.

In George Osborne’s budgets this year and in 2013 the Chancellor gave the independents a helping hand with a few tax incentives:

  1. £2,000 Employment Allowance – baristas, waitresses, chefs and all employees earning over £7,956 per annum (or the equivalent weekly/monthly amounts) will result in their employers paying national insurance at a rate of 13.8%. This cost can be reduced by upto £2,000 by making a claim when processing the payroll;
  2. Small Business Rates Relief extended – businesses occupying properties with a rateable value upto £12,000 currently benefit from reduced rates and this was extended for a further year to 31 March 2015. A new £1,000 discount is also being provided to retailers who have properties with rateable values upto £50,000. Qualifying retailers are likely to include coffee shops.
  3. Annual Investment Allowance increased to £500,000 – it might seem a little far-fetched to anticipate that independent coffee shops could spend anything like that level on espresso machines and other equipment. However, this is actually an extension to an increase that came into effect on 1 January 2013 when the previous limit was £25,000. A shop requiring significant capital investment before opening could be eligible for 100% tax relief in year 1 on all costs.
  4. VAT registration limit increased to £81,000 – micro coffee shops or take-away establishments may be able to benefit from the £2,000 increase but is likely to remain too low to be of concern to the majority of typical independents who will continue to apply 20% to their sales.
  5. Seed Enterprise Incentive Scheme (SEIS) – first introduced back in 2012/13 and intended to be for a limited time period the scheme has now become permanent. The scheme gives incentives such as 50% income tax relief for investors and could be suitable to entrepreneurs needing a helping hand to set their coffee shop on its way. There are of course rules to follow but the scheme carries more incentives and provides more opportunities than it’s big brother, the EIS scheme, and could be suitable for coffee shop companies.

Whether you’re at an early stage in considering your coffee shop business or have been operating for some time it is essential that you take advantage of every available relief and structure your business accordingly. Whilst the market continues to grow so the competition becomes more fierce and margins are squeezed further. Independent coffee shops might be outnumbered and not as prominent as their rivals but get it right and you can live the dream and make it a success.

Chris Carr, Business Services Manager

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