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 concentrate on throughout 2024.

1. Verify banking covenants

Banking covenants, the foundations overlaying finance, might 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 exterior the said guidelines of a mortgage settlement. Banks embrace these covenants in agreements resembling debt service cowl as an early warning system. It is unlikely this may pressure any enterprise closures, nonetheless, being exterior the banking covenants might imply banks will take the possibility to renegotiate and probably enhance charges.

CFOs ought to hold a detailed eye on these ratios. A great administration group might be modelling totally different situations 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 affect 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 keep up exact and up-to-date monetary information and should change tax cost schedules, probably bringing them ahead and making them extra frequent. It will end in cashflow cycle modifications.

Retailers ought to discuss to their accountants as quickly as doable to plan for the change.

3. Plan for brand spanking 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 plenty of leasehold, that is a major change. And the stability sheet will look very totally 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 modifications will affect 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 think about upcoming laws that requires using separate entities for every function.

Modifications in regulatory limits based mostly on turnover, stability sheet dimension and workers numbers could require companies to segregate their audit and advisory companies between totally different suppliers.

It’s probably that this variation will affect teams with over £500m turnover and so now could be the time to domesticate relationships with quite a few totally different suppliers to make sure finest worth.

5. Be agile on company

With the total landslide of producers but to undertake company, retailers might want to hold 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 might imply to general community sizes.

These manufacturers promoting company usually counter the decrease margins on supply with higher quantity and higher effectivity. For the OEM, that may be achieved by means of fewer retailers and fewer teams working the remaining community factors and so retailers ought to hold all of their choices open.

6. The longer term panorama for the sale of EVs

The ban on new petrol and diesel automobiles could 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 exterior the goal, might be lodged towards producers, retailers will probably be focused on EV gross sales to a good higher extent in future.

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

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