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tx (bpp) > Computing Trading Income (4) > Flashcards

Computing Trading Income (4) Flashcards

1
Q

When can a election be made?

A

For an unincorporated busienss to calculate trading profits on the cash basis

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2
Q

If an unincorporated business has revenue which does not exceed £150000?

A

Has the option to compute its trading profit using the cash basis

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3
Q

When does business stop using the cash basis? (receipts)

A

Receipts in previous tax year exceed £300000

And receipts for current year exceed £150000

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4
Q

When does business stop using the cash basis? (commercial circumstance)

A

Cash basis is no longer appropriate and an election is made to use accruals accounting

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5
Q

How are taxable trading profits under cash basis calculated?

A

Cash receipts - deductible business expenses actually paid in the period

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6
Q

What does cash receipts include?

A

Cash and card receipts, including amounts received from sale of plant and machinery

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7
Q

What do business expenses for cash basis of accounting include?

A

Capital expenditure on plant and machinery (except cars). Other capital expenditure are not business expenses

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8
Q

When a business elects to use the cash basis?

A

It is assumed to use fixed rate expenses rather than make deductions on usual basis of actual expenditure incurred

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9
Q

When to use statutory approved mileage allowance for cash basis?

A

To compute deduction for business miles

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10
Q

If business premises are used partly for private purposes for cash basis

A

Private use adjustment can be made on the number of occupants

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11
Q

When a business elects to use cash basis?

A

It is assumed to use fixed rate expenses rather than make deductions on usual basis of actual expenditure incurred

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12
Q

Advantage of cash basis (accounting)

A

Simpler accounting requirements

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13
Q

Advantage of cash basis (tax)

A

Only pay tax when receive the funds

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14
Q

Disadvantage of cash basis (losses)

A

Losses can only be carried forward as opposed to many more options under accruals basis

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15
Q

Disadvantage of cash basis (expenses)

A

Expenses only deductible when physically paid

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16
Q

Capital expenditure and tax relief? (capital payments)

A

Capital payments for plant and machinery being deductible

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17
Q

Capital expenditure and tax relief? (capital receipts)

A

Capital receipts from sale of plant and machinery being included in calculation of adjusted trading profit

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18
Q

Legal fees in connection with a renewal of a 15 year lease?

A

Allowable

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19
Q

When something is disallowable?

A

It is added back

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20
Q

When something is allowable?

A

It isn’t added back

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21
Q

Gift of 25 identical pens bearing Lulu’s business to clients. >£50

A

Disallowable

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22
Q

Depreciation?

A

Disallowable

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23
Q

Light and heat directly related to property?

A

Disallowable

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24
Q

Motor expenses?

A

Disallowable. (Private journey miles/Total miles) * Amount in SPL

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25
Q

Personal tax for a capital gains tax computation?

A

Disallowable

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26
Q

Purchase of new shop?

A

Disallowable

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27
Q

Decorating private flat?

A

Disallowable

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28
Q

Gift to customers of food hampers?

A

Disallowable

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29
Q

£100 donation to national charity?

A

Disallowable. It is added back

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30
Q

£40 donation to a local charity fate?

A

Allowable. Isn’t added back

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31
Q

Selling price of goods for own use?

A

Disallowable

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32
Q

Capital allowances available?

A

Deducted back from adjsuted trading profit

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33
Q

Cash receipts within taxable trading receipts?

A

Is included in tax adjusted trading profits

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34
Q

Bank transfers from customers within taxable trading receipts?

A

Is included in tax adjusted trading profits

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35
Q

Cash receipt from sale of machine within taxable trading receipts?

A

Is included in tax adjusted trading profits

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36
Q

Interest received on the bank account within taxable trading receipts?

A

Not included. Taxed as investment income

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37
Q

Cash payments for suppliers of goods for resale?

A

Allowable

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38
Q

Bank transfers for purchase of goods for resale?

A

Allowable

39
Q

Standing orders to utility companies?

A

Allowable

40
Q

Cheque payment for machinery?

A

Allowable

41
Q

Interest on bank loan?

A

Allowable

42
Q

Fixed rate mileage allowance?

A

Allowable. % of time for business purposes * miles * 25p OR 45p

43
Q

Bank transfer for purchase of car?

A

Disallowable

44
Q

Petty cash payment for entertaining customer?

A

Disallowable

45
Q

Legal fees in connection with the acquisition of a freehold building?

A

Disallowable

46
Q

Legal fees in connection with the renewal of a 15-year lease on some land?

A

Allowable

47
Q

Motor insurance on a van used in her trade?

A

Allowable

48
Q

The gift of 25 identical pens bearing Lulu’s business to clients > £50?

A

Disallowable

49
Q

Depreciation? (other income)

A

Disallowable

50
Q

Impairment losses (trade)?

A

Allowable

51
Q

Entertainment expenses for customers?

A

Disallowable

52
Q

Patent royalties?

A

Allowable

53
Q

Bank interest paid?

A

Allowable

54
Q

Rent and rates expense?

A

Allowable

55
Q

Private car expenses?

A

Disallowable

56
Q

Bank interest received?

A

Deductible from tax income

57
Q

Profit and losses on sale of non-current assets?

A

Deductible or added back from tax income

58
Q

Staff entertainment?

A

Allowable (£150 limit applies to taxable benefit for the employees)

59
Q

Customer entertainment?

A

Disallowable

60
Q

Invoice sale that was paid in a different tax year?

A

Is deducted from invoice sales in the current year

61
Q

Debt collection

A

Allowable

62
Q

Accountancy fees?

A

Allowable

63
Q

Legal fees in connection with the purchase of the clothing shop

A

Disallowable as capital expenditure

64
Q

Capital expenditure, which involves spending on acquiring, improving, or maintaining assets

A

Disallowable

65
Q

Selling price for goods of own use?

A

Disallowable

66
Q

Excess renumeration (same job but different salaries)

A

Higher salary - lesser salary. Disallowed

67
Q

Expenditure on entertaining and gifts generally?

A

Generally disallowable

68
Q

Staff entertaining and gifts to third parties?

A

Allowable

69
Q

Proprietor’s salary and drawings?

A

Disallowable

70
Q

15% of the leasing costs of a car with CO2 emissions exceeding 50 g/km?

A

Disallowable

71
Q

Motoring expenses?

A

Disallowable

71
Q

Wholly and exclusively?

A

Allowable

72
Q

Not for trade purposes?

A

Disallowable

73
Q

Reflects more than one purpose?

A

Disallowable

74
Q

Educational courses for staff?

A

Allowable

75
Q

Educational courses for trader?

A

Allowable

76
Q

Removal expenses?

A

Allowable

77
Q

Travelling expenss to trader’s place of business

A

Disallowable

78
Q

Counselling services to emplouees leaving employment

A

Allowable

79
Q

Patent royalties paid in connection with an individual’s trade?

A

Allowable

80
Q

Pension contributions?

A

Allowable

81
Q

Premiums for insurance?

A

Allowable

82
Q

Damages paid?

A

Allowable

83
Q

Improving an individual’s personal security?

A

Allowable

84
Q

What is depreciation?

A

Capital expenditure. Therefore is disallowable

85
Q

Improvements?

A

Disallowable

86
Q

Accounting profits not taxable as trading income so must be deducted?

A

Capital receipts
Bank interest received
Rental income taxed as property income

87
Q

Capital allowances?

A

Deducted from tax-adjsuted trading profit

88
Q

Meals, drinks, or recreational activities?

A

Disallowable

89
Q

Repairs?

A

Allowable

90
Q

Salary which is not excessive for full-time work?

A

Allowable

91
Q

Decorating private flat?

A

Disallowed

92
Q

Interest paid?

A

Allowable

tx (bpp) (130 decks)

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