6: Common adjustments

Question 1

business gifts are generally disallowed, UNLESS: (3)

Answer 1

1. less than £50 each, per annum
2. bears name or logo
3. is not food, drink or tobacco

Question 2

business entertaining - allowable or disallowable?

Answer 2

disallowed

Question 3

staff entertaining - allowable or disallowable?

Answer 3

allowable

Question 4

if you take out a loan for a business purpose (purchase of capital item), is the interest payment allowable or disallowable?

Answer 4

allowable

Question 5

if you take out a loan for a mixed purpose (e.g. a car which will be used for both business and personal), is the interest payment allowable or disallowable?

Answer 5

the interest payment proportion that relates to business is allowable

Question 6

is the capital element of a loan ever allowable?

Answer 6

no

Question 7

are incidental costs of obtaining loan finance (e.g. loan arrangement fees) allowable or disallowed?

Answer 7

allowable

Question 8

what is the unique thing about a finance lease and the allowable expense?

Answer 8

in a finance lease, both the finance lease interest and finance lease depreciation is allowable.

whereas in an operating lease, only the lease rentals is allowable

Question 9

LEASE OF A CAR:

if it is over 50g/km, what is the restriction on the allowable expense?

Answer 9

disallowance of 15%, therefore:

85% x lease charge in pnl account

Question 10

For leases entered into before _ ___ 2021, the restriction of 15% disallowance applies to cars with CO2 emissions exceeding 110g/km

Answer 10

6 April 2021

Question 11

does the 15% disallowance for lease of high emission cars apply to vans or motorcycles?

Answer 11

no

Question 12

bad debts written off - allowable or disallowed?

Answer 12

allowable and can be deducted

Question 13

loans to employees written off - allowable or disallowed?

Answer 13

allowable

Question 14

accountancy fees are generally allowable but in what case are they disallowed?

Answer 14

if the accountancy services relate to the traders personal tax affairs

Question 15

provided the business is continuing to trade, can termination payments be deducted?

Answer 15

yes!

Question 16

upon cessation of trade, can termination payments be deducted?

Answer 16

only a deduction for statutory redundancy payments

Question 17

restrictive covenant payments are payments made to former staff to stop them from joining a direct competitor - are these payments allowable?

Answer 17

yes

Question 18

if a trader decides they want to become a chartered accountant, are the costs of the training allowable or disallowable?

Answer 18

disallowable, as it is classed as acquisition of new expertise, therefore capital expenditure

Question 19

if a trader becomes a chartered account and needs to maintain their annual costs for yearly training, are this allowable

Answer 19

yes

Question 20

if a staff member wants to become a chartered accountant and the company agrees, are these training costs allowable?

Answer 20

yes

Question 21

premium on leases - allowable or disallowable?

Answer 21

allowable, on the basis you have to use the calculation to find the premium relating to income tax and divide by lease term

Question 22

there are two main website costs:

1. setting up a website
2. regular upkeep costs for website

are these allowable or disallowable?

Answer 22

1. disallowable - capital expenditure

2. allowable - revenue expenditure