Consider Profitability:  It is important to know that you are buying a B&B business with the potential to make profits.  The easiest way of making a quick assessment is to look at existing results.  Wherever possible ask to see the last three years of accounts as these should provide a good guide.

Business Structure:  Consider whether the business should operate as a sole trader or as a partnership.  This is not always a straightforward decision and will involve assessing who is actually running the business, your available tax allowances and your marginal tax rates.  By choosing the most appropriate structure it may be possible to achieve worthwhile tax savings.

VAT:  If you are buying a VAT registered B&B business then you should ensure that your own VAT registration is in place before completing the purchase.  By doing so you will be able to treat the purchase as the “transfer of a going concern” and this enables the transaction to be zero rated for VAT purposes.  If this is overlooked then you will have to pay VAT at the standard rate on the purchase price.

Apportionment of the Purchase Price:  You will have agreed an overall price for the cost of the business and this will include the property, fixtures & fittings and goodwill.  You should seek to apportion this between these elements in the most tax efficient manner for you.  This is unlikely to be the preferred apportionment for the seller and generally speaking, professional guidance from your accountant is essential.

“Rent a Room Scheme”:  For the smaller B&B business, you may be able to take advantage of the Inland Revenue “rent a room scheme” concession.  This simplifies your record keeping obligations and enables the first £4,250 of income to be received tax-free.

Business Records:  All businesses need to maintain a clear distinction between business and private transactions.  For a B&B business there will be even more areas where business and private transactions overlap (such as the purchase of food, provisions and payment of utility bills) and so setting up an appropriate bookkeeping system and keeping proper records is vital.  You should discuss with your accountant whether to maintain a manual or a computerised system and ensure that from “day 1” you do keep proper records.

Business Plan:  The most successful businesses have a written business plan setting out goals, objectives, finances structure, disposal and timing.  Your B&B business will benefit immensely from having such a plan and from monitoring, reviewing and amending it as necessary over the lifetime of your business.