A Franchisee’s Guide to Taxes: Essential Tips for UK Franchisee’s

Welcome to our accounting firm’s blog, where we provide valuable insights and guidance to franchisees. In this post, we will discuss essential tax considerations for franchise businesses. Understanding the tax obligations and opportunities specific to the franchising industry is crucial for maximising profits and ensuring compliance with HM Revenue and Customs (HMRC) regulations. Let’s dive into the world of franchise taxes in the UK.

Franchise Business Structure and Tax Implications:

Franchise businesses can operate as various legal entities, such as sole traders, partnerships, or limited companies. Each structure has distinct tax implications, including income tax, National Insurance contributions, and Corporation Tax. We will help you explore the pros and cons of different business structures and highlight their respective tax obligations.

Franchise Royalties and VAT:

Franchise agreements typically involve the payment of royalties, which can attract Value Added Tax (VAT). We’ll explain how VAT applies to franchise royalties, the relevant thresholds, and the process for registering and submitting VAT returns. Understanding these rules will help you comply with HMRC regulations and avoid penalties.

Capital Allowances and Franchise Equipment:

Franchise businesses often require significant investments in equipment and assets. Understanding the concept of capital allowances can help you make the most of tax relief on these investments. We’ll guide you through the process of claiming capital allowances on franchise equipment and explain the different types of allowances available.

Employee Payroll Taxes and Auto-Enrolment:

As a franchisee, you may have employees on your payroll. We’ll outline the various payroll taxes you need to consider, such as income tax, National Insurance contributions, and the Apprenticeship Levy. Additionally, we’ll discuss the legal requirement for auto-enrolment pensions and provide guidance on meeting these obligations.

Franchise Expenses and Tax Deductions:

Managing expenses is crucial for maintaining profitability. We’ll explore the deductible expenses specific to the franchise industry, including rent, advertising costs, franchise fees, and professional fees. Understanding what expenses you can claim will help you reduce your tax liability and optimise your business finances.

Corporation Tax and Franchise Profits:

Franchise businesses operating as limited companies are subject to Corporation Tax on their profits. We’ll delve into the computation of corporation tax, tax rates, allowances, reliefs, and deadlines for filing tax returns. Additionally, we’ll discuss strategies to minimise your Corporation Tax liability legally.

Franchise Exit Strategies and Tax Planning:

At some point, you may consider exiting your franchise business. Proper tax planning is crucial during this transition to minimise tax consequences. We’ll provide an overview of the tax implications involved in selling or transferring your franchise and discuss tax-efficient exit strategies that you can consider.


Franchise businesses in the UK face unique tax challenges and opportunities. Understanding the intricacies of franchise taxation is essential for compliance, maximising profitability, and effective financial management. By considering the factors discussed in this guide, you can make informed decisions, minimise tax liabilities, and ensure the long-term success of your franchise. Remember, seeking advice from qualified tax professionals that understand franchising is always recommended.

If you need support with your franchise taxes then please call us on 01978 803000 to see how we can help.