Income from Self-Employment - Lecture 4

Question 1

Badges of trade

Answer 1

Applied to see if transactions are capital or trading

Question 2

Disallowable expenditure

Answer 2

If not incurred wholly and exclusively for purposes trade, profession or vocation

Question 3

Expenditure incurred before commencement of trade allowable if: (2)

Answer 3

• Incurred within 7 years prior to start date

- It would have been allowable

Question 4

Expenditure incurred before commencement of trade treated as

Answer 4

Trading expense incurred on first day trading

Question 5

Car lease cost disallowed

Answer 5

15% x hire/lease charge if CO2 > 130g/km

Question 6

Car lease cost allowed

Answer 6

All if CO2 < 130g/km

Question 7

Disallowed

Answer 7

Add back

Question 8

Allowable

Answer 8

No adjustment

Question 9

Amount deductible for lease premium

Answer 9

(Premium - (2% x (n-1) x Premium)) / n

Question 10

Any business expense paid for/ borne privately

Answer 10

Deductible for trading income

Question 11

Current year basis

Answer 11

Profits of 12 month accounting period ending in tax year assessed that year

Question 12

Exceptions for CYB (3)

Answer 12

• Opening years of trading
• Closing years of trading
• Change of accounting date

Question 13

Class 2

Answer 13

Paid by self-employed individual

Question 14

Class 4

Answer 14

Paid by self-employed individual based on taxable trading profit

Question 15

Cash basis for small businesses designed to

Answer 15

Make easier to understand tax for everyday business owners.

Question 16

Capital expenditure (CBSB) =

Answer 16

Treated as revenue expense, full tax deductible in period of expense

Question 17

Capital allowances (CBSB) =

Answer 17

Irrelevant as deduction for full cost of asset has been made

Question 18

Income from sale capital items (CBSB)

Answer 18

Treated as income for taxable trading profit purposes

Question 19

Car used partly privately and partly for business purposes

Answer 19

No capital allowances claimed under cash basis and motor expenses calculated using mileage allowances

Question 20

Cash basis based on

Answer 20

Cash paid/ received rather than accruals basis to calculate taxable profit