With the beginning of what certainly will show an eventful 12 months, Chris Bond, tax accomplice and head of motor retail at BDO UK, takes a have a look at the important thing points motor retailers ought to deal with throughout 2024.

1. Verify banking covenants

Banking covenants, the principles masking finance, may trigger some administration complications within the coming 12 months. As rates of interest have risen, together with enterprise prices, and as earnings ease – in comparison with current years – this might imply the ratios between the 2 are exterior the acknowledged guidelines of a mortgage settlement. Banks embody these covenants in agreements akin to debt service cowl as an early warning system. It is unlikely it will drive any enterprise closures, nevertheless, being exterior the banking covenants may imply banks will take the prospect to renegotiate and probably enhance charges.

CFOs ought to maintain a detailed eye on these ratios. A great administration group shall be modelling completely different eventualities as much as six and even 12 months out to ensure every part is inline.

2. Put together for Making Tax Digital

Making Tax Digital is transferring to its subsequent stage and can quickly prolong to company tax. It’s prone to considerably impression 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. It will 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 stability sheet ranging from the reporting interval following January 2025. At the moment companies simply report the quantity of hire, not the property valuation. All leased properties should be recorded on a enterprise’s stability sheet.

For these teams which have numerous leasehold, that is a major change. And the stability sheet will look very completely different as it is going to enhance the asset and legal responsibility base of an organization.

Enterprise leaders and CFOs might want to assess how the adjustments will impression 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. Interact 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.

Adjustments in regulatory limits based mostly on turnover, stability sheet dimension and employees numbers might require companies to segregate their audit and advisory companies between completely different suppliers.

It’s possible that this modification will impression teams with over £500m turnover and so now could be the time to domesticate relationships with various completely different suppliers to make sure greatest worth.

5. Be agile on company

With the total landslide of producers but to undertake company, retailers might want to maintain a really shut eye on every model’s plans for his or her community. Not solely ought to retailers hearken 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 provide with larger quantity and larger effectivity. For the OEM, that may be achieved by way of fewer retailers and fewer teams operating the remaining community factors and so retailers ought to maintain all of their choices open.

6. The long run 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 Automobile 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 exterior the goal, shall be lodged in opposition to producers, retailers will possible be focused on EV gross sales to an excellent larger extent in future.

Whereas there could also be little method spherical this, retailers will want to ensure they’re not mis-selling EVs to safeguard in opposition to future repercussions or challenges.

Learn BDO’s evaluation of the newest AM100 seller group analysis right here.