Ch7: Computing Trading Income

Question 1

Deductible or Non-Deductible?
Depreciation (Capital Expenditure)

Answer 1

Non-Deductible = Disallowable = Add Back

Question 2

Deductible or Non-Deductible?
Legal and Professional Fees in relation to Capital Acquisition and Disposals (Capital Expenditure)

Answer 2

Non-Deductible = Disallowable = Add Back

Question 3

Deductible or Non-Deductible?
Fees incurred in the renewal of short leases (<50 years) (Capital Expenditure)

Answer 3

Deductible = Allowable = Do not add back

Question 4

Deductible or Non-Deductible?
Sale of NCA (Capital Expenditure)

Answer 4

Non-Deductible = Disallowable = Add Back

Question 5

Deductible or Non-Deductible?
Incidental Costs of obtaining a loan (Capital Expenditure)

Answer 5

Deductible = Allowable = Do not add back

Question 6

Deductible or Non-Deductible?
Cost of Registering Patents and Trademarks

Answer 6

Deductible = Allowable = Do not add back

Question 7

Deductible or Non-Deductible?
Chargeable Gains / Allowable Losses which can be dealt under CGT for individuals and CT for companies (Capital Expenditure)

Answer 7

Non-Deductible = Disallowable = Add Back

Question 8

Deductible or Non-Deductible?
Fines and Penalties

Answer 8

Non-Deductible = Disallowable = Add Back

UNLESS a parking fine paid on behalf of an EE which was incurred whilst on job.

Question 9

Deductible or Non-Deductible?
Impairment Loss

Answer 9

Non-Deductible = Disallowable = Add Back

Bad Debts (e.g. Loans to EEs)

Question 10

Deductible or Non-Deductible?
Staff Entertainment

Answer 10

Deductible = Allowable = Do not add back

Question 11

Deductible or Non-Deductible?
Staff Gifts

Answer 11

Deductible = Allowable = Do not add back

Question 12

Deductible or Non-Deductible?
Client Entertainment

Answer 12

Non-Deductible = Disallowable = Add Back

Question 13

Deductible or Non-Deductible?
Client Gifts

Answer 13

Allowable if:
- <£50 per person per year.
- Has a company logo.
- Not food, drinks, tobacco or vouchers.

Question 14

Deductible or Non-Deductible?
Unpaid Remunerations

Answer 14

Non-Deductible = Disallowable = Add Back

If not paid within 9 months of the end of the period of accounts (POA)

Question 15

Deductible or Non-Deductible?
Subscriptions and Donations

Answer 15

Non-Deductible = Disallowable = Add Back

UNLESS it is for the benefit of the trade.

E.g. Charitable and Political Donations

Question 16

Deductible or Non-Deductible?
Legal and Professional Fees incurred in Capital and Non-Trading Items

Answer 16

Non-Deductible = Disallowable = Add Back

• Acquiring new capital assets or legal rights.
• Issuing Shares.
• Drawing up Partnerships Agreements and litigating disputes over the terms of the partnership agreements.

Question 17

Deductible or Non-Deductible?
Legal and Professional Fees that relates to Trading

Answer 17

Non-Deductible

• Incurred when defending the taxpayers title to NCA.
• Charges connected with a Breach of Contract.
• Expenses of the Renewal (NOT THE ORIGINAL GRANT) of a short lease.

Question 18

Deductible or Non-Deductible?
Leased Cars

Answer 18

If CO2 emissions > 50 g/km
THEN 15% of the cost will be disallowable (Non-Deductible = Add Back)

Question 19

When to use Cash Basis?

Answer 19

• Unincorporated Business revenue is <£150,000.
• Continue to use until EITHER:
  (a) Receipts for the CY EXCEEDS £150,000 AND Receipts in the PTY EXCEEDS £300,000.
  (b) Better to use ACCRUALS BASIS.