Business Insight 116 – Tax Avoidance? (blog & vlog)

 

1990

80/20 time again. 80% of our sales were in a quadrant bordered by the A24 Horsham to Worthing road, the A21 Hastings to Tunbridge Wells road, the sea to the south, and the A264 Tunbridge Wells to Horsham road to the north (which ran through East Grinstead and Crawley). Or East and Mid Sussex, a bit of West Kent, and South Surrey. It was decided to find one depot central to that area and shut down our Lewes and Ashford operations.

The management of our Ashford depot had been average to say the least; and we were a very different company if you had us fit your windows in east Kent, in comparison to the service levels and quality experienced from our Lewes operation.

We had rethought the way our depots worked. Windows and doors used to be stored individually in racks, which involved a lot of lifting and walking with these heavy products (both for our depot staff and the fitters). The average number of products per job was four, so somebody had the bright idea of designing an ‘A’ frame trolley on wheels that could accommodate 4 products per side of the ‘A’; the fitters could just wheel their job to the back of the van and the same trolley could be loaded with fresh products after inspection, directly off of the lorry into a parking space in the depot. In fact, the next day’s work was always wheeled to the depot doors the night before in preparation for our fitters. Simple but effective.

Moving depot, therefore, wasn’t a big deal – it was just a matter of running down your stocks in the old site, and transporting the empty trolleys to the new site ready for the fresh deliveries. Other than that, we had to have: a trims cutting bench for finishing lengths/strips of timber or UPVC to tidy up a job, a rack for the pre-cut lengths, and a big light box for checking products off the back of a lorry, and create a secure consumables store. The operation of a depot, for what were finished bespoke products, really wasn’t rocket science.

Some freeholds were identified which might fit the bill. The bank would even lend us the money, but there was absolutely no way I was ever going to let the bank anywhere near us ever again if I didn’t have to; and I didn’t – we would rent.

INSIGHT 116:- KPMG were encouraging us to ‘roll over’ the proceeds from the sales of our freeholds into another freehold to defray a capital gains tax bill of £78,000, but I had already learned that making a strategic business decision just for the sake of saving tax was stupid.

 

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