Module 3 Flashcards
What are the 6 badges of trade?
Subject matter Length of ownership Additional work Profit motive Frequency of transactions Manner of sale
What constitutes capital expenditure?
Money spent on acquiring or maintaining fixed assets
What is disallowable because they are expenditure of capital nature? (Add back if been expensed)
Depreciation Losses (profit deducted) Legal surveyors and other fees Goodwill written off Initial repairs to assets
(add back if been expensed)
Main reasons for adjusting figures?
Capital should not form part of trading profits
Taxable/deductible elsewhere
Legislative rule
Items of a capital nature should not form
Part of taxable trading profit
What key items of income are taxable but not as trading income?
Rental
Interest
Dividend
(Deduct from trading income, under another heading)
What expenditure may receive tax relief but not part of trading?
Gift aid
Contributions to a personal pension scheme
Added back to trading income
No deduction is allowed to expenses
Not incurred wholly and exclusively for the purposes of the trade
(expenses must relate wholly and exclusively to be allowed)
Business entertainment and gifts
No deduction allowed for expenses incurred in providing entertainment or gifts
Exceptions: it’s their usual trade or provided to employees
Gifts that are allowable?
Traders trade to provide those items
Conspicuous advert for the trade but not food, drink, tobacco or voucher
Gifts to employees
Gifts to a charity
Restrictions on leased cars
Emissions < 110 fully allowable
Exceed 110 add back 15% of lease cost
Bad and doubtful debts, no adjustment required for?
Actual bad debt expense
Movement in a specific provision
Movements in general provisions are not allowed for tax
Movements in general provision are
Not allowed for tax
Increase (dr)- added back
Decrease (cr)- deducted
Rules restricting deductions
Unpaid remuneration (bonuses) deduction only permitted if actual payment made within 9m of end of a/c
Social security contributions
Penalties, interest and VAT surcharges
Crime related payments
Rules allowing deductions?
Pre trading expenditure- set ups costs
Within 7 years prior to commencement
Incidental costs of loan finance
Counselling and retraining
Redundancy payments (max x4 statutory)
R+D
Treatment of interest?
Allowed as a deduction as a business expense (wholly and exclusively for trade)
Advertising expenditure is?
Generally allowable
Charitable donations are?
Allowable to local institutions and which employees are likely to benefit
Add gift aid back as relief elsewhere
Legal expenses are?
Allowable when incurred in normal course of trading
Repairs?
Repair what we’ve got okay (maintain)
Improvements need adding back
What type of provision needs to be added back to be taxed?
General
Normal vs alternative basis?
Minimise profit so pay less tax
Rev - expenses
Or
Rev - 1000 allowance
Lowest is best
General provisions
Increase added back
Decrease deducted
Things that aren’t allowed as a trading deduction?
Movement in general provision
VAT surcharge for late payment
Accrued employee pension contributions
What is revenue expenditure?
Money spend on general operating costs or consumables such as rent
