Lecture 3

Question 1

Deductibility of expenditure

Answer 1

Expenditure deducted when they are exclusively for trade purposes
ISNT deductible if it had no relation to the trade
Eg pizza delivery man hits someone & issues fine- making accidents isn’t part of business
Fuel for business and a day trip out

Question 2

Disallowed expenditure

Answer 2

Capital expenditures
Entertainment and gifts
Bad debt
Appropriation of profits

Question 3

Gifts in employment

Answer 3

Allowed for staff entertainment (parties)

Customer entertaining course not allowed

Question 4

Allowed expenditure

Answer 4

Bad debts
Specific provision for bad debts
Political donations

Question 5

Disallowed expenditure

Answer 5

Increase in general provision or allowances (doubtful debt)
Nontrade bad debt
Most fines and penalties
Criminal payments

Question 6

Cash basis

Answer 6

Small unincorporated businesses may calculate their profits on cash basis (revenues actually received less expenses actually paid)
Doesn’t exceed a threshold of currently £150,000

Question 7

Overlap profits

Answer 7

In the opening years basis periods may overlap and some profits maybe taxed more than once

Question 8

Can can you get relief for overlapped profits

Answer 8

Yes
When business ends
However if business changes its account date, some overlap relief may be given in the year of change

Question 9

Change of accounting date

Answer 9

Step 1- identify the year of change

Step 2- determine the length of relevant period

Question 10

Change of accounting date – overlap profits

Answer 10

Total overlapped profits
X
(Length of relevant period - 12mths The normal length of accounting period)
/
Total length of overlapped period that lead to overlapped profits