 My name is John Taylorson, and today it's my pleasure to facilitate this webinar, which is not just about resilience, it's also about tax, it's about VAT. But it's going to be a lot more interesting than that might give you the impression. So Hugh, Thomas from Puffin, some of you will remember from previous webinars. Phil, you might remember from one of the webinars, and Andrea has joined us today, and she's from Centurion VAT. So I'm going to pass over to Hugh for a moment to just introduce us all properly. And then I will take over again and we'll spend the next 45 minutes to an hour chatting through tax and VAT and excise and management information systems and the like. Hugh, over to you please. John, it is a short introduction from me, you know, I've got a role on the the Welsh Food and Food and Drink Industry Board. And one of the work packages that we developed a number of years ago was the Investor Ready programme and Building Business Resilience, which BIC and I are delivering on behalf of the Welsh Government and the Food and Drink Board. You know, and this is a series of seminars, I think, you know, hopefully most of the people listening in have already perhaps been on one or two of them. But there's a series of seminars to hopefully, you know, upskill the sector, you know, and have some open discussion on, you know, on improving their businesses and, you know, how businesses can have better control over their finances and improve their discipline in that area. Brilliant. Thank you, Hugh. OK, so this year you may have noticed we've had a bit of a crisis and that's really tested companies both in terms of some of the subjects we've covered in terms of planning, risk mitigation, trade credits. But very often corporate structure and taxes come through, not least because that has stopped some people being able to access some of the assistance that might otherwise have been able to get. OK, we're going to talk through some of those issues. As we do that, we're going to have, we've got a chat function so that you can ask questions or make points as we go along and we'll try and answer those as we go. For my part, being a previously food and drink business, I too have struggled with the AT and tax and the like, not just understanding it but also the administration behind it. So, you know, for lots of you, small or large, it sometimes comes as, you know, a bit of a pain and yet it is very valuable, particularly for food and drink businesses because, of course, ordinarily we are net beneficiaries. We actually reclaim the VAT and we don't have to charge it on a lot of our outputs. But knowing when to charge for VAT, of course, is extremely important and what is recoverable. I mean, tax needn't be taxing, but it is a worry. And of course, HMRC are renowned for not having a sense of humour if you get it wrong. So today, one of some of the areas we want to cover are how you avoid getting it wrong. We're not going to get into individual tax advice. That's not really for today. But hopefully you'll go away with an idea about what you should worry about, when you should worry about and who you should go and worry about it with. So, without further ado, I'm going to turn to fill in the first instance and let's just talk about it right at the start. Corporate structure and tax. What should we be and when should we be paying for it? Phil? Phil, thanks. I changed the name of that a little bit. I once tried to do a webinar on corporate structures and nobody signed up for it. So I suppose in that sense, this is a good start. We've got 17 participants. But I think nobody turned up because it wasn't terribly exciting. I'd pitch that as setting your business up to succeed. And there is a bit of understanding of the outset around what that means. I guess broadly speaking, we encounter three structures and I will keep this brief. Lots of people will start out as a sole trader. So they get going, they start selling some stuff. And at the end of the year, they try and work out how much stuff they sold, how much it costs them, and ultimately feed a sort of profit number into a self assessment tax return. So that feeds into income tax. Many businesses have kind of grown up and particularly in the rural community as partnerships where broadly speaking, you get together with some other people, run a business. Again, go through the same process of working out what you sold, what it costs you. And again, coming out with a figure that's split in line with perhaps a partnership agreement if we've gone that formal, but more often than not, in line with, I guess, an idea that the partners have got. And that number goes on a self assessment tax return. So back to income tax. Finally, and very commonly, of course, the limited company structure, which is slightly different, limited by its nature is a limited liability, which deviates from the structures that we just talked about the partnerships where there is liability the owners or the sole trader. And really that means that actually if the business were to become insolvent, I suppose in simple terms, and then you the shareholder potentially lose your investment, but it's not a liability to you personally. And that's kind of broken with personal guarantees. So a bit of a word of caution before everybody says that there's a there's a kind of catch all that personal guarantees to the bank are exactly that they are personal so with your limited or not. And companies pay corporation tax. And on the salary that they'll pay to directors and shareholders and the director and shareholder will pay income tax. And they will also pay income tax on any dividends received from the company. So broadly speaking, most businesses will contend straight off the bat with either just income tax on any profits that they're generating to them personally, or in a company structure, some income tax and some company tax. So we're already up to two taxes and anybody that's got ambitions to or is likely to or is selling more than 85,000 pounds worth of stuff is also going to be contending with VAT. And John put it kind of simply and said, Well, look in the food industry, aren't we all kind of the beneficiaries of the kind of VAT game and actually, it's just not that simple. And which it won't surprise you to learn because you've got a whole load of people in the food chain that absolutely are the beneficiaries from the from the VAT. And they can reclaim the costs of their inputs, their capital expenditure. And that's great news. And they charge VAT or at least they charge it at 0%. And right at the end of the food chain, the restaurants that you go and visit, and actors, tax collectors, because they do charge VAT at 20%. And whilst they can reclaim it, and they usually net losers in that game. So it's too simple to say that the VAT market will kind of lead food and drink businesses to be in one area or another. And Andrea will no doubt touch more on that. And, but why would I be any of these particular structures when I touched on limited liability of a company structure. And so, fundamentally, the most ambitious businesses are seen as limited companies. And so for those that have got a growth ambition beyond the kind of small business around the around the family house, the family home, and you are likely to see a limited company structure, and you are likely to see a VAT registration. And in time, and as you grow, and people start to look at credit, they start to look at the health of your company, and they expect to see that you're in that business. And you might well say at what point do I become a limited company. And, and actually, that's a discussion that you need to work through with somebody that understands the wise and where for us, but from a kind of purely tax perspective. So if you're anticipating, or anticipating, kind of pulling out something in the order of 100,000 pounds, and then I'd start to be thinking about whether you're a limited company structure. And one other quick word on structures, and we will, I'm sure touch on it, and at some stage in the course of this webinar, and many of you will have come across R&D tax credits. R&D tax credits are a great thing for the food and drink industry, because as the name suggests, if you're doing some sort of R&D, you may be able to claim me credit or pay less tax. Great news. They only apply to limited companies. So it's just worth having that in your mind. If you're at the startup phase, and you think I'm not quite big enough to be a limited company, but I've got all of this research and equipment that I've got to go into to get my new product launched, R&D will only apply to you as a limited company. That's great, Phil. Well, you haven't touched on exercise and I know some of the alcohol and cider makers and what have you had that little worry. And also, we've already had one question, which you've already touched on a little bit is, particularly for those people who are starting a food and drink business, maybe in conjunction with their existing work. Maybe better off, you know, with the, particularly if they're a high rate taxpayer, you know, dividends, corporation tax, often as well, of course, they put their own money in and they've got a director's loan account. Does that all get a little bit confusing for people as to what's the most advantageous way from a tax point of view? Yeah, thanks. I'll come back to that. I'll touch briefly on the exercise point. And it's a really interesting point and nobody is happy. I can tell you in the game of what duty that they're going to pay. So the small brewers want a different regime. The cider makers feel like they fall off a cliff because duty kicks in when they go beyond 7000 litres. You know, the spirit makers pay their duty up front. There is nobody that feels terribly happy about the duty regime that they're in. And everybody watches the budget very closely because it will affect the profitability or otherwise of your business overnight in many instances. I suppose what I'd say about that is you've got to be aware that if you're in that regime that that is something you've got to be considering. And to be understanding the implications of how, when you're going to to settle up for that duty. And actually, you know, dare I say it, to understand what sort of business you think you can be running based on that. And a big example would be the cider maker that, for example, you know, might sell 7000 litres of cider reasonably profitably. And I've seen businesses jump to selling 40,000 as they move into the, into the duty regime and actually be no better off. And so you've really got to understand the maths, the mechanics behind it, the finances behind it and whether it's worth it. You know, more often than not, you'd say for a cider maker, maybe you've got to get to 80,000 litres of sales before actually you kind of make that leap. So that's a neat example. And if I'm paying 40% taxes, it better to take income out as a dividend or taxable pay or a combination of both. Well, if you're paying 40% tax, then you're a higher rate taxpayer. And that means, I suppose, broadly speaking, that your earnings are in excess of 50,000 pounds. And actually, what will happen is you could take it out as a dividend. But if you want the same money, you're going to pay higher rate tax on the dividend. So at a basic rate, a dividend is taxed at 7.5%. At a higher rate is 32.5%. Sounds like dividends are better. Well, it's not that simple. The same thresholds for basic rate and higher rate are at 20% and 40% for a salary. But you've got national insurance on top. Well, hang on a second Phil, doesn't that all sound a lot worse? Yeah, perhaps. But actually the salary will attract a corporation tax deduction, which the dividend will not. You might want a combination of both because an amount of salary relevant to qualify for your national insurance contributions would make sense, perhaps. And I guess there is a marginal tax efficiency on taking most of the rest out as dividends. But again, there are wider considerations. Has the business generated enough profit to be able to allow you to take a dividend? Because in company law, they can only be paid from retained profits. So if you don't have any, they're not an option anyway. Like John mentioned, a director's loan account, many directors will have placed a large sum of money into their business that they are owed back to them effectively. And because it was your money, your taxed income in the first place that you invested into the business, it is absolutely your right to be able to pull that money back out and you don't pay any tax on it. But actually, people don't often lend others money for free. So you could take that a stage further and say, well, shouldn't I be getting some interest from the director's loan that I've put in. And it's kind of part of a bigger remuneration package. You might include a bit of interest that comes to you. You may or may not have cropped the interest, a certain amount of interest each year is actually tax free. So you could be making that loan account work even harder for you by charging your company interest. There's some form feeling that goes with all of that and some administration, but understanding all of that in the round is going to be really important. Tax shield, effectively. Yeah. Okay, that's what the point is, if you're a food and drink company and you're in that position, it's worth having the conversation with your accountant about tax shields and what are we borrowing and the level of borrowing and how it affects our corporation tax. Can we get into our favorite subject of VAT and I use the term VAT because normally it has a doing word in front of it whenever I speak to people in the food and drink industry. So, obviously, it is, as I was like to say, somebody explained VAT on food and drink to you and you've understood it, they haven't explained it properly. So without getting into digestive biscuits, jaffa cakes and the like. The principle these days I'm guessing is is that first of all, you need to ensure that you understand what you're producing and what its VAT status might be. Andrea, how do we go about doing that? Well, food VAT liability is, you know, it can be an absolute minefield you mentioned the cakes versus biscuit argument is there's lots and lots of examples of things that you might think is zero rated but a standard rated. But there is within within the UK VAT law, there is a schedule for which lists what's zero rated so sort of basic food food stuffs. And within that schedule as well as it telling you what is zero rated, you know that there's a whole raft of exceptions that are standard rated as well. So really important if you're starting out particularly to make sure you understand where you sit within the liabilities. I think that actually to be fair to customs that there is a good public notice on food as well which has, you know, it's quite a hefty notice and includes a lot of information on food as well on related goods, connected goods. Just to clarify that, I mean, what you're talking about is going on the HMRC website and having a look at the various VAT notices and I can recommend if we have a second lockdown and we're all playing parlor games on Zoom. If you want to play the game of standard rated, reduced rated, zero rated, exempt or outside on food and drink, it's hours of fun trying to guess. But that HMRC website, when you do go on there, that's still not always entirely clear Andrea. No, I mean, I wouldn't always recommend looking at customs notices. For a start, they are customs interpretation of the rules. It's not always the case that they're correct. But in the case of food, I think if you're starting out then definitely should have a read of that particular one. It's a good starting point. But then I would also say if you've got any doubts when you've looked at the rules, you should always, you know, obviously I would say this, but you should always seek some advice to make sure that you're doing the right things and that you've interpreted it correctly. That's where professional advice is a lot better than, I mean, I've always avoided and I've always said to everybody else, don't ring HMRC up and ask them a question you don't already know the answer to. Definitely. And also on these days, so I started off in customs and exercises of that inspector in the 80s, which is a bit scary. And in those days, if you wrote in and asked a question, I would write back and try and give you the answer, try to be helpful. Customs make it very clear these days that if you shouldn't really bother them, unless you're absolutely certain that what you're asking is not covered in their notices. And if you do ask them, their first pushback is usually that it is covered in their notices. So, yeah, customs are not particularly not as, I don't think quite as helpful as they used to be and they're probably more challenging than they used to be. So, you know, if you've got any doubts, I would say seek professional advice before you go to customs. And that professional professional advice needs to come from people who understand food and drink as in rather than just generalist. Yeah. Yeah, definitely. I mean, we work as VAT consultants. We don't do VAT returns. So the sort of work that we get involved with is complicated stuff that, you know, perhaps a general accountant wouldn't be able to help you with. So in relation to food, go to a food specialist. Go to a VAT specialist. Don't, don't assume that, you know, your, your, your day to day accountant knows the answers to everything because, you know, perhaps they don't, they, you know, they're generalists in that in a lot of cases. So go to somebody who knows food. Talking of which, Phil, you know about food. I mean, we can sit here and play parlor games, all the anecdotes about where VAT goes wrong on food and drink, but there is a serious point to it that it does go wrong for food and drink. I think, you know, particularly those people who've got slightly more complicated or vertically integrated businesses and haven't understood and plowed on regardless. Yeah, it can go wrong. It can go wrong very badly and very quickly, actually. It can also go right. If you understand what's going on and what you're doing. So a couple of them, a couple of tales, I suppose. Two years ago I took, took a lady on. And she said, I'm a bit concerned because I've been working with an accountant and I'm not sure that we've got this or that set up correctly. And we had a bit of a look beneath the covers and the truth was she didn't. And she ended up with a 27,000 pound VAT liability that she didn't have any money to pay. And that was actually because she misunderstood her VAT situation, her input and her output VAT and had accumulated this liability completely unknowingly from her perspective. She had to help her to work out how she was going to deal with that and then ultimately to kind of restart and to go again. And in doing so to help her with getting the system set up to be able to record things the right way in the first place. And so that she knew what was coming, setting aside some money for the inevitable VAT bill at the end of the quarter and recognizing that it wasn't all hers. So that's how badly it can go wrong. I suppose there are some, some better tales for those that have understood exactly what's going on up front. And I've got a really nice story at the moment with a client that I work with that. And as many businesses did in a restaurant and he clocked the through lockdown, he was going to have to do something to adapt here to shut the doors. He was going to need to keep trading in some way. And I suppose unlike many businesses, what he didn't do was just package up everything that he'd normally do in the restaurant and sell it on. So we had a look, we'd had a chat, and it worked out, we'd worked out that if he could sell cold takeaway food in a different way, and then he could sell it at 0% that. And so instead of handing 20% of whatever he was taking over in the restaurant to the Batman, each and for all of the sales each quarter. He could actually end up with money coming back in for the fact that he paid on the packaging to put the goods there for the advertising or whatever it was. And actually not have to pay any vast over for the sales that he'd made. And for the first time ever from his point of view, he's had a quarter now where he's, he's been in a repayment position. Now that won't keep going in perpetuity, but I suppose others sort of missed the trick with that where they continued to sell the same food that they'd always sold, but got it delivered as a kind of takeaway. So yeah, understanding exactly what it is that you've got going on is is of critical importance. And when you're in those sort of situations that you're relying on, first of all, the professional advice to make sure you understand the tax codes. But then obviously you need the systems set up properly. Now, I know we're all advocates here of the likes of zero. And of course you have to have that set up properly in the first place and tax codes change and there's our new VAT notice and what have you. Two elements to that really one, how do you make sure you're set up correctly to how do you remain set up correctly? How do you make sure you're in an informed position to know that something's changed? Phil, perhaps. So for me, I think this is where my view of this is that the role of an accountant has changed. And we've moved from being a group of people that you dropped a brown paper bag off to some time after the end of your year that produced a kind of set of accounts that told you how you did nine months ago. And I think it's important for you to needing to be relevant for today's businesses and by that I mean that actually the engagement is throughout the year and actually always in advance of year end and not after year end. And what does that mean? Well, it means that there's a more regular dialogue. It means that yes, we can get you set up at the outset on a zero. But because we're in close contact, because we're working with you on a regular basis, we're able to spot and advise and discuss and challenge and look at the changes that are coming. And they're not just VAT changes, frankly. They might be changes that are coming out of an awesome statement. They might be changes that we see coming around the corner for pensions, for capital gains, for whatever it is. The structure of the company might need to change to take advantage of new notices and the light that come out. But for those people who don't have Phil and are smallish businesses and don't feel that they ought to be able to rely on their existing accountant, where else should they be looking? Or what else should they be using as reference material to make sure they at least know there's something they don't know? I think Phil's exactly right. In the way things are these days, you really shouldn't leave your accounts to the year end. You should, you know, it's critical to know what's going on on an ongoing basis. And I would say, particularly, you know, that's true if you're in the catering restaurant takeaway sort of business. Because, you know, that's always been a really, you know, it's a big favourite of customs to look at. I mean, I've worked both from a customs perspective and, you know, as a consultant on unfortunately many, many VAT assessments where, you know, HMRC have come along and said, you know, you've understated your takings by a significant amount. And I think, you know, if a business is doing its accounts more regularly and not waiting to the year end, then, you know, it's in a position where it can see if things are going wrong, you know, if its margins are not right, etc. And, you know, a lot of these assessments that we see, you know, they're not, I mean, half of them are not really correct at all. But, you know, it's not always the assumption that, you know, the owner of the business as perhaps suppressed takings. It can be that, you know, you've got the wrong staff or money is going out of the business that you don't know about in some way. And keeping your accounts up today is, I think, really important to sort of, to protect yourself against that sort of thing. I mean, a lot of people, some of the people on this call and others, I know, I can imagine we've got people say, for example, a coffee roasting business, it's got a manufacturing business at the back that's producing food and drink for selling online, for selling wholesale, but also at the front of the place, they've got a retail coffee outlet and an EPOS system. So that EPOS system has got to be set up, right? It's also got to talk to the rest of the business in terms of the information, the various revenue streams that are going out of the business. Who should, how should people be going about that and thinking about making sure that EPOS system is set up right? Well, setting it up at the beginning correctly is very important. Phil mentioned that 27,000 pound assessment somebody had, and probably that was from a misunderstanding at the beginning about fat liabilities. In terms of EPOS systems, customs are much better trained at interrogating those than they once were. For a start, if you must set up the codes correctly, if you've got a list of products that have different liabilities, you need to make absolutely certain that that's right, because it's a basic check if HMRC come in on a fat inspection. A good one would ask to see that information and to review it. So really, really important, essential that you get that right. And together with that, to make sure your staff realize why they have to do things in a certain way. Again, I've seen a lot of problems where staff have perhaps somebody selling hot takeaway food and cold takeaway food and stuff. They've just said to the staff, this is what you do. But perhaps they need to understand better that it actually is a cost to the business if you don't do it right. If you start the wrong button on the till, you're actually breaking the tax. So disaster. Phil, for those people who've got EPOS systems and getting those to feed back into zero, just a sort of the finishing point on this is how do you help make sure those people are bringing that stuff in right? And it's coded up in zero or whatever the right way, because you've got these various categories. And I must admit when I go into zero and raise an invoice, I'm not entirely clear which code I'm putting this stuff under between exempt and outside and zero and reduced. Yeah, I think it's really interesting. And there's a couple of things on system. I think they're brilliant. Systems are brilliant for helping to drive efficiency. And what they won't help you to do is understand what should be going on in the first place. And you've got to do a couple of things you've got to understand what it is that should happen. And if you can't understand it, then make sure that somebody can educate you will help you to understand and get it set up in the right way. The system can then do its bit and whether that's an EPOS system, whether you don't have an EPOS system because you don't have a kind of retail bit. You've just got a zero. You've got an output from that system and you can do some work in understanding that. And again, if you can't understand what the output is, then get somebody to help you. Don't sit there sort of scratching your head thinking, you know, I think this feels and looks like it's probably about right because it can be really costly. I think you can also spend a whole load of time trying to get a system set up to support your business that actually becomes a kind of false economy. And I had a client before that was trying to get this ERP system set up an enterprise resource planning system. It was all singing and all dancing and it looked at all elements of production and sales and human resources and whatever the business just wasn't big enough to warrant that set up and that system. And it wasn't quite right because he spent he spent two years trying to get the system to do the right thing. And that was two years he could have been focused on the business with a simpler system and understanding what was going in and what was coming out. I think it's reasonably simple. Make sure you get it set up at the start. Make sure you understand why it sets up that way as Andrea said, and make sure that you do something with it out the back. And because if you don't, then you might as well not have it. And the beauty of a system like zero. I'm not an accountant. Obviously I've got a finance background, but I'm not an accountant, but we as a business use zero as well. And I think it's very intuitive how it works. I don't think you need to be an accountant to to use it well. I mean, I know other brands are out there. But, you know, if that is a really useful system, I mean, I understand this designed by someone who's not an accountant as well isn't it so it's all helpful stuff. And for us, what I like about it is it's simple. It doesn't over complicate. You know, it gives us what we need. It doesn't, you know, do anything doesn't require us to do more than we need. So yeah. And you can track you can track with these systems who's done what as well can't you so if there is something to unravel. It's at least you can see what it is rather than people paying cash out of the tilt of suppliers and not keeping the paperwork straight. And just just on that, particularly on the people who are in hospitality and retail, we've had a question in from Joe Smith for takeaway food about cold about buffets and as that's cold, would that not incur VAT. And whilst we're not here to answer individual tax questions is that principle in that. How do you go about thinking about a question like that when you're in business and you need to make a decision on the day. Yeah, you need to be just on on that type of thing. You need to, and, you know, as you say we're not answering specific questions but the issues that you need to think about there are. Are you telling cold takeaway food, or which is zero rated, or are you in fact providing catering, which is not, which is not zero rated it's it's standard rated. So, you know, if you're if you're providing cold buffets for events. You need to consider the rules there are lots of, you know, quirks around it lots of conditions to be met so. So if you are doing that sort of thing, you need to think. I need some advice here I need to look at it before I start doing it. Yeah, and just just on that I mean I've in the past I've had the 18 voices come into me from large food and drink businesses, and they've just whacked that on Phil when when I didn't think that was was liable so I pushed back and they said, what does matter you can reclaim it anyway, but it's not as simple as that is it. It's not as simple as that. And, you know, we've got to go about getting getting this right it doesn't mean that people won't make errors. And but actually, you know, it's a really interesting point john because I think that speaks to the way that you kind of want to work with your supply chain. And actually come into some, you know, a common understanding. And but actually we've got we've got a kind of duty to get it right for one another, because it matters for one another. And you don't want your, your business to be doing something that's not right because somebody else hadn't got their end quite right. You want to be working in partnership with the people that you've got to work with. And, and I think that's more important in this, this kind of moment with covid than it ever has been before and actually we're seeing sort of a closer kind of between agencies and alliances with with people looking at kind of strategic integration, looking at joint ventures. And, but, but, you know, that to me is a kind of, it's a compliance issue go and get it right and get the right, get the right advice and work with your supply chain in the right way. Sorry, HMRC on that as well. Technically, that is only reclaimable as input tax if it was properly charged. So you could have the situation where customs would deny you that that reclaim rather than going back to be nice and going back to the supplier and they would just deny you the the reclaim. Well, I mean, you say going back to them and being nice. I mean, it was, I don't think I was nice on the occasion because of course you don't want to be paying that on Sunday you don't need to pay that on and doing the paperwork. Yeah, no, I meant HMRC, you know, in the old days they would have said that, oh, we'll go back to the supplier and unravel it from that. Yeah. No, technically that they could say no, you can't have that VAT. It's always the worry, which is always the word. Hence why if you don't think it's right push back. Definitely, definitely. Yeah. Bigger organizations like Puffin Hue, obviously you've got, you've got those systems, you've got those ERP systems and the like, but what point do you decide that you need to invest in those systems? How big do you think you needed to be before you could justify that sort of investment to sort of systemise all of this admin? Well, what I was saying on the ERP systems, Jon, is there's a kind of, there's a whole track record of disasters in our sectors of people I know of trying to implement very complex ERP systems as Phil says that, you know, they've ended up paying software companies huge amounts of money and it's added no value to the business whatsoever. So we've got a very different system here, which is we run SAGE as our main accounting system, but then we've got what we call a manufacturing execution system and MES system that churns out kind of raw data that we suck out of SQL databases using Excel. And, you know, we then work on that for our management account and control, you know, so we've got a bit of a hybrid system that works very well. But you know, I think the core of this is, you know, when you get a larger business you've got to have a strong finance team, you know, we've got, you know, three very experienced people here, you know, they're all, they're all charted accountant level, you know, and they're running out of weekly profit and predictives and, you know, looking at a year, a week, a month, a year ahead and we update that every week, you know, so it's using a kind of range of tools. I think, you know, we've got a bit of a, as I say, a bit of a hybrid system that works really well for us, you know, what that benefit that manufacturing execution system and it also then runs traceability in the factory and it controls all the machines and you've integrated several functions within the business. Yeah, it leads to the PLP, to start machines and control tricks that, you know, does that, you know, which if you try to add the finance function on top of that would have just made it, you know, a complete dog's breakfast, but you see it, you know, works very well with how we run it. Yeah, well, I can't speak highly enough of ERP systems when I've been involved in businesses where they've been implemented, so hours of fun. Phil, but the fundamental part of that is the functionality within Xero, as Andrew was saying, it does a lot of good stuff very easily and you've got, you know, almost an ecosystem of apps that can sit on top of that. So for many food and drink businesses, I know you get warnings or you get advice notes come up on Xero anyway, don't you, for things that you should be worrying about, particularly with HR elements. What size do you need to be before you start investing in, say migrating from Xero to Sage systems? How big a business do you think, you know, people are when they have to sort of grow into the bigger systems? Yeah, I don't think there's a one size fits all kind of answer to that. And what I'd say is, actually, there's a probably more fundamental kind of guiding principle, which is that you've got to have a finance system set up that helps you to understand what is going on with the business. And you could turn over, you know, 100 million and still be using Xero, if it was, if it could handle the number of transactions, there is a sort of finite number of transactions that it likes to live with. But if, assuming it could handle those and you could still get the data out that you wanted to run the business, then I don't think that you look at needing to change, you might have other bolt-ons that deal with inventory or deal with whatever other bits and pieces you might need. And so, for me, that's, it's about what it's able to deliver. And, you know, I sat in a meeting yesterday with a client that I've got, he's very profitable and has been for many years, which is great. And I've been saying to him, do you understand what's going on? You know, do you really kind of get what, you know, how the business is performing in this area or in that area? Yeah, yeah, I absolutely do. I've got all my margins up here and I know what's going on in the, from a cash perspective. And I said, okay, that's, you know, that's great. And he wasn't interested really in sort of hearing it. Now, in the last year, he's implemented a new system. And he said, and in the course of implementing this new system, we've actually identified that some of our margins weren't quite right. And instead of running at 21%, which he's done for the last few years, which is actually, you know, kind of by luck, perhaps, rather than judgment resulted in quite good sort of result from his perspective. He's run the first part of this year at 25% with his new system. And what that's meant is that this year looks a lot similar to last year, despite the fact that he lost three months trading. That's a big difference. That's a very big difference. That's a very big difference. And so, you know, that is about the system being kind of fit for purpose, not about the size or scale of the business and delivering the information that you need to go and run that business. But what you're effectively saying is having is not just the tax codes right in the system, it's ledger codes, it's being able to identify the cost of sale for the particular either channel or product that you're producing. That's absolutely right. And it is unbelievable, the number of businesses that we might come across that you could identify a loss making product that actually has been masked by the performance of the wider kind of suite of Yeah, so some where some people say well, that doesn't matter because we've got to sell that product anyway to have those customers. You can't manage the profitability if you can't attribute the right cost of sale to either the product or the channel of distribution. Absolutely right. And don't get me wrong, there are strategic decisions you might take to go and sell a product that either generates a lower margin or perhaps just breaks even. And because as part of your lineup of products, it's important. I'm led to believe, for example that wicks sell cement close to a loss. But that you know that you can go and buy a cheap bag of cement in wicks. And actually while you're there, you'll also go and pick up the pack of screws rather than heading off to screw fix because although you could buy it cheaper, you happen to be in the shop. And, you know, if you've got a strategic decision, that's fine. What you don't want is to end up selling loss making products without a knowledge that that's where they are. I think in the world of on online where you have potentially products that you might have to sell, either on van sales or delivered services, things like potatoes may not make much money on them, but you have to have them on there. You know, because you won't, you won't sell the other stuff. So I think it's very, very common within food and drink that we have products that we sell because we have to sell them rather than making money on them. It's knowing it's knowing how much you're not making on them, I guess is the key thing, which brings us nicely to the future. And first of all, you mentioned it at the start and it did so we'd come back to it. It's tax credits. Everybody's talking about them. But of course, there's one of those things that we should be making more effort with, shouldn't we, Phil? Yeah, absolutely. So for those that don't know, an R&D tax credit is really useful. It's like it sounds is related to research and development. It means that you either get some tax back, pay less tax, or, or in fact that you can kind of surrender it for some cash coming into your business, which would be pretty welcome for a lot of people. And that applies to making the key point there, Phil, is you don't actually have to be making money to benefit from R&D tax credits? No, absolutely. So if you are loss making, then you can elect to surrender the loss that the tax credit has generated for cash coming into your business. Broadly speaking, they work by saying, what are the expenses that we've incurred on research and development? One of the costs of the people, of the product development, of the wasted products, the attempts that we made, and it's in areas where you couldn't go out and find a commercial solution of the shelf. Okay. And that doesn't mean that somebody else hasn't done it. Somebody else might well have done it, but they're not going to tell you what the answer is, because it's commercially sensitive information. So you go out there and you go and develop it. You work out what it costs you to do it, and you effectively sort of multiply the cost of that up, which makes it look like it costs more and therefore you pay less tax. But that's a really important point as well about R&D tax, because a lot of people I think have the misconception that if somebody else has already done it, it's not R&D. It's peculiar to your business and whether you have done it or not before, isn't it? Yeah, that's exactly right because somebody is not going to tell you, they're not going to give you the recipe for Coca-Cola. So if you want to go and make it, you're going to have to try and try a few things and you'll get some of it wrong. And it will be rubbish and you'll throw it in the bin and there will be a cost of the materials and there will be a cost of the time for the people that are working on that recipe and the development. I suppose, you know, what could it be? Well, it could be that you want a cheese with a certain texture profile. You want the calcium lactate crystals that are in there that give it the crunch. You want a product that has got reduced sugar is going to need to travel in a certain type of packaging because actually you don't want it, you don't want to sell it in plastic, but you don't want it interacting with the alternative packaging. And you can't quite get it right. You want to... I suppose it even goes as far as software and Hugh was talking there about the systems that he's got and the fact that it's not a whole ERP system, he's got bits that will sort of bolt together. Well, if there is kind of bespoke and it's a more contentious area with HMRC and it needs proper review and proper advice, but even if it comes to working out how to integrate systems to do something that people haven't thought you could do or kind of works for you, there is potentially R&D that's going on in that space. And the conversation you and I have had in the past is that because of course I'm duty ban to say that Bic has got a app that works on both iOS and Android, where you can record against individual projects the time you spend within the business on these so that your accountant can have a really printed out CSV file as often as they'd like to record all this. The advantage being Phil. Well, we know that when you record R&D as you go, your claim is typically larger than if you give somebody a brain dump at the end of the year and guess what you think you might have done for the R&D. So it's constantly at the forefront of your mind and you're recording it as you're going along, you're going to end up with a bigger, better claim. Yeah, yeah, for the record account and stone guess if you don't record it, you're potentially missing out on it. Okay, so we're nearly at the end. Thank you very much indeed. Can I both as Andrea, we were going to have a prediction and a top tip from you if we made please. Right. I top tip. I would say get on board with Brexit. If you're an importer and exporter, there are going to be changes. And I would definitely recommend that you use you start addressing them and receiving updates from. I mean, we do them but updates from anywhere and everywhere to make sure you know what's going on there and how that's going to affect you. So that would be my top tip. Are you issuing updates, Andrea? Can people access that for you? Yeah, we, if you, we send them out to our clients regularly. I've got a lot of experience in international trade. We're running training sessions. But yeah, if anyone would like to go on our website, which is centurionback.com. There's this facility to sign up for newsletters, news bites. There's no obligation whatsoever. We won't pester you. But it's one way to keep on top of what's going on. Because, you know, there will be changes that affect you, even if your business is just involved with zero rated stuff, if you import an export. And in terms of predictions, when we leave the EU, we could, it would then allow the government to mess about with, with that rate. So that could be in a positive or a negative way. You know, they might decide that they want to help the restaurant industry more by keeping a reduced rate in place, for example. And the other thing, which is not really, it is a prediction, but it's probably also going to be a fact is related to making that digital. Anyone who's about registered will know that, you know, that regime has started submitting your back returns digitally. There will be a day where you're also expected by or required by HMRC to upload your data as well. So that's my not particularly pleasant prediction. Thank you, Andrea. Phil, top tip and prediction. Well, my prediction is that a bit like Andrea, that we're going to see an increasingly kind of digital world. And that's going to mean that actually corporation tax starts to get paid quarterly, maybe monthly. And I see get access to all of that data. And it's also going to rather sadly do accountants out of a revenue stream that they've employed for the past 250 years. Which is the idea that we can pull some of these accounts together at the year end. So that's my prediction systems will do that. And therefore, actually, it doesn't mean that I think I'm going to be kind of wholly redundant. I think that actually what it will mean is the relationship with accountants changes so that you need to talk to an accountant throughout the year about what's going on and the planning that's going on. And you either need a finance team like Hughes talked about that's got the in-house capability to go and do it. Or you need an accountant that is going to be on the phone to you and talking to you, you know, once a month say about what's going on. And so my kind of top tip is that actually if you feel like you've got that relationship with your accountant, great. If not, make sure that you can find somebody that you can get that with because you should be talking to somebody once a month in the climate. Hughes, after on reflection, top tip and a prediction. I think, you know, top tip is to get people around you that you trust and will provide you the right advice, John, isn't it? You know, it's, it's interesting to talk about R&D tax credits. A number of years ago and four or five years ago, we had one of these kind of off the shelf companies came in to give us some advice on this. And we felt as a body was far too edgy. If you know what I mean, I think, but we took some lessons from that and went back to people that we trust more and, you know, found a kind of equilibrium and, you know, a long term position on what we do in that area. You know, we've got, we've got tax advice specialists and, you know, we've got our in-house team here, and I trust all of those implicitly. You know, I'm the MD of a business, I know very little about the detail, to be honest, John, but, you know, we know we've got team members who know what they're doing, you know, so seek the right advice is my top tip. Any prediction? It's going to be time to change. I think, you know, an opportunity, opportunities and threats, you know, but don't miss out on the opportunities. Yeah. Okay, thank you here. Well, I think, I think just to summarise them, getting your business structure right from the word go and planning for growth seems to be older the day. Tax codes plainly, both in EPOS systems and in your accounting system and that comes back to ledger codes as well to make sure that you know what the cost of sale really is for a product or a market that you're serving. Professional advice, don't be ringing up HMRC with questions that you could get an answer from from R&D, plainly that's a rich vein and if anybody's interested in that we can help them with a little app that will help them do that. I'm due to be able to say that we've got another these webinars on the 29th of September at 930 in the morning. This one your love it's other people's money, which is actually I think it'd be pretty relevant because of course, if you've run out of means of raising debt then you might be tempted to look at the equity sources. Hence the title other people's money. I was particularly pleased with that one as you can tell. I have to thank Hugh, Andrea, Phil and Linda for keeping me honest in the background. I have to thank everybody else who got up this time of the day and hopefully you're still there on the other side and we'll look forward to seeing you all and more on the 29th. Thank you. Thank you.