2 - Trading Profits Flashcards
What is considered to be allowable expenditure?
Expenditure that is incurred wholly and exclusively for the purposes of trade
What is considered to be non-trading income?
Investment income (interest, dividends or property rental income)
Interest on overpaid tax
Profits from sell of asset
Are drawings/salary/income tax/NICs of owner allowable?
No these are dissallowable so add on
Are staff costs allowable?
Yes
Are entertaining costs allowable?
Only if entertaining staff
Are gifts to customers allowable?
Only allowable if have advertsing on, cost less than £50 and are not food or tobacco. If not, full amount is added as this is dissallowable
Are car leases allowable?
Fully allowable if <50g (if over 50g then we add on 15% of lease)
Are legal fees to do with capital expenditure allowable?
No dissallowable
Are legal fees to do with short term leases allowable?
No dissallowable UNLESS it is to do with a renewal of a SHORT TERM LEASE then it is allowable
Are costs to do with setting up a website allowable?
No dissallowable as considered asset so capital expenditure
Are advertsing and marketting costs allowable?
Yes
Are fines to the owner allowable?
No
Are fines to staff allowable?
Yes if do with business
Are write off of loans to staff allowable?
No
How many years is pre trading expenditure allowed?
7 years prior and is treated as incurred on the first day of trading if allowable
What is capital expenditure is pre trading - is this allowed?
Yes will be added to capital allowances
For capital allowances what section(s) of the table must we time apportion if short/long period?
The AIA and the WDA %
What is the max annual allowance for AIA?
£1,000,000
Can cars go in the AIA?
No
Can lorries/vans go in the AIA?
Yes
For capital allowances what is meant by a related business?
This is where the owner has multiple companies and therefore the AIA is split between these companies so they do not all get £1m allowance per annum. Can split anyway they like however.
What do we fill up the AIA pool with first?
Special rate pool as this is at 6% so we get less CA each year, we can use the AIA to get instant 100% relief
What is the main pool for and what is the WDA %?
This is for general plant and machinery + costs to get it in the building
This is also for cars <50kgm (as they go to the special pool if over 50g)
Lorries and vans go in main pool regardless (but AIA first)
18% WDA
What is the special rate pool for and what is the WDA %?
This is for intengral features (heating systems/partitionwalls/lifts/moving floors
Dirty cars over 50g
Assets with life 25 years
6%
What is the first year allowance pool?
For cars that have 0 emissions or are brand new
What is the building and structure allowance?
If construction of a building goes ahead after 2018 the costs associated can go as an allowable expense in the TATP not in CA calcualtion.
Does not include professional costs
Pro rata.
Must be non residential building!!!
Rate is at 3% per annum to put as allowable
What is the opening year loss rules?
If there is a loss in the first 4 years of trading we can allocate the loss beyond the normal current/prior year. We can allocate to the 3 previous years against total income.
For normal trade losses where can we allocate these?
In current year all or nothing and against chargebale gains too all or nothing
same for prior year too = both of these are agaisnt total income
if carried forward goes against trading profits only
How long can a trading loss be carried forward?
4 years
What is the short life asset pool for?
Assets with life less than 8 years
What is the WDA % of short life asset pool?
18%
What is the perk of the short life asset pool whereby is the WDV is below a certain amount we can do something?
If WDV is below £1000 the tax payer can elect to write off the remaining balance. Theis £1,000 is pro rata for the period.
What do 2 things do we exclude from the SBA allowance?
Land and anything that is used for living in (dwelling house)
As there is no balancing charge for buildings that qualify for SBA when sold how do we deal with the disposal?
The person purchasing the building can claim the remaining 33 1/3 period of the SBA at 3%. When that is sold that amount is claimed back when a chargeable gain arises.
If the business is VAT registered do we include the additions / disposal salesincluding VAT or excluding?
excluding VAT so the net figure. The only time we do not do this is if it is a new car, we do the vat inclusive figure as this type of vat is not recoverable.
What is the max amount of trading loss that can be applied against total income in current/previous year?
Max loss is higher of £50,000 or 25% of ANI
