Common adjustments Flashcards
gifts
staff = allowable
non-staff = disallowable unless:
less than £50 per person per AP
Bears business name, logo or clear advertisement
does not include food, drink or tobacco
Interest
If loan taken out for trade purposes:
interest payment = allowable
capital repayment of loan = disallowable
Leasing costs under FRS 102
Operating lease - where lessee does not have all risks and rewards incidental to ownership of asset - deducts lease payments via PL
Finance lease - Lessee does have substantially all risks and rewards - put asset on BS, depreciate - dep and int payments on P&L
no capital allowances in either situation
for both instances, amounts put through PL allowable
for finance lease depreciation in PL is allowed
Leases under FRS 101/IFRS
IFRS 16 - removes link between operating and finance leases for a lessee but not a lessor
get a deduction for the spreading of the capital costs
i.e. £1m debit spread over 500 days
deduction is £1m x 365/500
High emissions leased cars
disallowance 15% with CO2 > 50g/km
for leases entered into before 1 April 2021 restriction applies to cars with > 110 g/km
does not apply to leasing of low emission or electric cars
motorcycles
no disallowance if car only available to tax payer for under 45 days maintenance costs allowed in full no matter co2
Redundancy
redundancy payments to staff when continuing trad is allowable as is wholly and exclusively for purpose of trade
legislation allows for statutory redundancy at cessation of trade
if company wants to be more generous then they can make a deduction up to
3 x the statutory redundancy level
during cessation:
company can get 4 x statutory amount ( 1 x statutory amount then 3 times cessation of trade stat amount rule)
where a termination payment has a direct link to a sale of shares - disallow due to duality of purpose
website costs
setting up - capital
maintenance - revenue
Premiums on leases
to calculate
P- premium x
(C) -less: 2% x p x (n-1)
=
A - property income
A treated as chargeable property income in the year the lease is granted
alternative formula for amount of premium chargeable as property income :
P x (50-y)/50
Post cessation receipts and expenses
if any income arises post cessation, a tax charge will arise when income recieved
companies can elect to have post cessation income taxed in year of cessation rather than when received
Pensions
deduct when paid
HMRC may disallow deduction where not wholly and exclusively trade or where not revenue
Can have a provision to spread the pension over 4 years
Spreading applies where the pension cont. paid is 210% compared to PY
Amount subject to spreading is cont which exceeds 110% of PY period ‘relevant excess contributions’
spreading only applies where relevant excess is 500k or more
Relevant excess thresholds
RE
- <500k = No spreading
-500k-999,999 = 1/2 current period, 1/2 next
-1m to 1,999,999 = 1/3 current, and then in each of next two
-2m or more = 1/4 in current and each of next three periods
when doing current add the spread amount to 110% of py cont
Patents
payment to a inventor for use of a invention or process
patent royalties paid by company are deductible in arriving at trade profit
if payment to a company, gross payment deducted in accounts- NO ADJUSTMENT NEEDED
if payment paid net of basic rate income tax, gross amount deductible for company
Removal expenses
thefts and defecations
donations to charity
allowable UNLESS ‘expansionary’ i.e. business moving to bigger premises such that removal costs will be enduring benefit for trade
dismantling and removing PPE allowed unless it was for the purpose of expanding
THEFT
allowable if employee (not directors)
Donations
QCD allowed as deduction in arriving at TTP
consists of following types of donation’s to charity:
cash donations
gifts of shares (quoted on recognised Stock exch)
gifts of UK land and buildings
