Chapter 6 - Self Employment

Question 1

What are four examples of disallowed withdrawal of funds from a business?

Answer 1

1) Interest to the owner on capital invested in business
2) Salary/drawings of sole trader/partner
3) Private proportion of owners expenditure
4) Excessive salary payments to a sole traders family

Question 2

What are three withdrawal of funds from a business?

Answer 2

1) Interest on a business overdraft
2) Business proportion of expenses used on owners assets (car, telephone)
3) Salary paid to family at commercial rate for the job

Question 3

7 Examples of disallowed capital expenditure

Answer 3

1) Depreciation
2) Amoritsation of a lease
3) Improvements
4) Cost of initial repairs to make asset usable
5) Costs associated with capital
6) Fees associated with acquiring new non-current assets
7) Expenses associated with the intial grant of a lease

Question 4

6 Examples of allowable capital expenditure

Answer 4

1)Capital allowances given as expense instead of depreciation
2) Repairs
3) Initial repairs if asset can be used before repairs
4) Defending title to assets
5) Fees associated with obtaining long term debt finance allowable for sole trader
6) Expense of renewing short lease, less than 50 years

Question 5

What are the disallowable expenses with relation to car leasing if CO2 emissions are above >50g/km?

Answer 5

15% of rental & Lease charges

Question 6

What are the allowable expenses with relation to car leasing if CO2 emissions are above <50g/km?

Answer 6

All of them are allowable

Question 7

How much can sole traders/partnerships earn before they have to move from a cash basis to an accruals basis?

Answer 7

If they have annual receipts of up to £150,000 and can continue to do so until annual cash receipts exceed £300,000