If you are about to purchase a new care home or embark on the sale of an existing care home, this article is a worthwhile reminder of some of the key accounting and tax-related considerations you should be thinking about.
Buying a care home considerations
The care home sector presents potentially lucrative business opportunities for those with sufficient capital to invest. The first port of call if you’re looking to purchase a care home is to carry out financial due diligence; a process done to assist a prospective purchaser (and/or funder) to make an informed judgment as to whether to proceed with a proposed transaction or not.
The due diligence will cover all relevant aspects of the past, present and forecasted future of the care home and include things such as historical trading results, accounting policies, projected cash flow, tax computations and key business weaknesses. The amount of due diligence conducted will be dependent on a number of factors, including the experience of the buyer, the size of the transaction, the funding structure for the acquisition and the risks involved.
Once a financial due diligence has been conducted and the buyer is satisfied with the price/risks, the buyer will need to seek advice to structure the transaction in the most tax efficient way. Transactions tend to have complex tax implications so this is an extremely important part of the purchasing process.
Selling a care home considerations
If you have been waiting for a healthy environment to sell your care home, then now may be a great opportunity to realise best value…but, as with many aspects of business life, having a plan of how you are going to exit your business and executing that plan over a period of time generally leads to a better outcome than when things are dealt with in an ad hoc way.
From a tax perspective, there are many aspects to consider, including Entrepreneurs’ Relief, Capital Gains Tax and Inheritance Tax. You may also wish to restructure the business to save tax and take advantage of a potential more beneficial tax position. Additionally, as the buyer is likely to conduct a financial due diligence investigation it is important that all of your financial information is accurate, up-to-date and presented in the best possible light for your care home.
Get yourself organised early and put yourself in the buyer’s shoes. This often makes the selling process more efficient, cost effective and secures the best sale price – you often only get one chance to get it right. Away from the accounting and tax-related considerations, it is important to think about the full spectrum of business issues when selling your care home, including marketing, administration, room cleanliness, employee engagement and working procedures.
Even the smallest changes can reap the rewards and help you to differentiate from other care homes on the market.
How we can help
As well as the technical excellence you would expect from a firm of chartered accountants, here at Hawsons we have dedicated teams of corporate finance and tax specialists who have extensive experience in the processes of buying or selling a business.
Buying a care home
We have the flexibility to tailor our services whilst being able to offer a full deal advisory service including, identifying targets, initial approach, negotiation of terms, due diligence, tax efficient structuring and raising finance.
Selling a care home
The sale of a business is often the culmination of a lifetime’s work. This will usually be a once in a lifetime transaction – with only one opportunity to get it right and achieve the maximum reward.
Expert advice should therefore be sought at the earliest opportunity. At Hawsons we have recently launched an exciting new exit planning service and, alongside the new service, we have set up a free-to-use “business attractiveness” test to help business owners find out how attractive their business is to a prospective buyer and identify any areas where the business can be improved to increase its value.
For care home owners looking to sell, this could be a particularly important tool for managing and streamlining the sales process, as well as maximising the best price for your care home.
Find more information about our business attractiveness test at: hawsons.2020staging.com/exit-planning
More from our care sector experts
You can also find all of our latest care sector news and newsletters here.
If you are looking for advice in a particular area, please get in touch with your usual Hawsons contact.
Alternatively, we offer all new clients a free initial meeting to have a discussion about their own personal circumstances – find out more or book your free initial meeting here. We have offices in Sheffield, Doncaster and Northampton.