Chapter 19 - Simplification Measures Flashcards
Flat Rate Expenses/Simplified Expenses
Unincorporated businesses can choose flat rate expenses
Motor Expenses
Flat rate motor expenses cover expenditure in respect of acquisition, ownership, hire, leasing and use of cars, vans or motorcycles used for the purpose of trade
Motor Rates
Cars and Vans: - First 10,000 miles: 45p - Additional miles: 25p Motorcycles: - All business miles: 24p
Motor Admin
Once flat rate is claimed, it cannot be undone, you must claim it every year the vehicle is in the business. If flat rate is claimed, no capital allowances can be claimed.
Business Use of Home
Monthly flat rate can be claimed instead of deducting business portions of house running costs for utilities such as gas and electricity
Use of Home Rates
Amount that can be claimed depends on the number of hours worked per month:
- 25-50: £10
- 51-100: £18
- 101+: £26
Use of Home Admin
Flat rate can only be claimed if at least 25 hours are worked at home a month
Business Premises Used Partly as a Home
For example a pub. Relief can be claimed for the total costs incurred in running the premises less a flat rate reduction to cover private use
Business Premises Rates
1 non-business occupant = £350 reduction in claim/month
2 = £500 per month
3+ = £650 per month
Business Premises Admin
Doesn’t cover mortgage interest, business rates and council tax. Can decided whether to claim each period
Cash Basis
Eligible sole traders and partnerships can use cash basis to calculate taxable trading income. LLPs and companies are not eligible.
Eligible Small Businesses
Sole traders/partnerships can use cash basis is total business receipts for the tax year the election is made do not exceed £150,000. Threshold is reduced for basis periods less than 12 months. Ceases to apply the tax year after receipts exceed £300,000
Cash Basis Cont.
Income is accounted for when it is physically received and allowable expenses are deducted when they are physically paid.
Maximum of £500 in interest expenses may be deducted.
Cash Basis Losses
Where a trader using the cash basis makes a loss, the trade loss can only be carried forward and set against future trading income.
Terminal losses relief is still available on cessation under cash basis
Trading Allowance
Trading allowance of £1,000 per tax year is available: if a person’s relevant income does not exceed £1,000, the income is not charged to tax and HMRC don’t need to be notified. You can elect for this not to apply. If relevant income exceeds £1,000, you can elect for the trading allowance can be deducted instead of allowable expenses.
