Adjustments to Profit

Question 1

Legal fees

Answer 1

Establish if capital in nature
renewal of short term lease (<=50years) is allowable

Question 2

What is the enduring benefit test

Answer 2

Less than 1 year - revenue in nature Greater than 2 year - capital in nature between 1-2 subjective

Question 3

Explain initial repairs

Answer 3

Odeon v Jones - number of cinema purchased just after the war in a run down state, however opened to the public and then gradually repaired and refubished - revenue

Law Shipping Company V IRC - company purchased a ship which needed immediate repair work as it did possess a certificate of seaworthiness - Capital

Question 4

Depreciation

Answer 4

Disallowbale unless deprection of an asset under a finance lease (do not own the asset and therefore no capital allowance can be claimed)

Question 5

Adjustment for stock taken / service use

Answer 5

Stock - as if it had been sold to a 3rd party include sale price and cost
Service - do not allow the costs associated