L3 Employment income - whats allowable? Flashcards
what is the general rule for expenditure to be allowable?
The general rule is that for expenditure to be allowable it must have been incurred wholly and exclusively for the purpose of trade
what happens if there is a private element to the business expenditure?
any private use, apportion it to find out the amount that relates to private use, and then add it back to the trading profit.
If expenditure is allowable what does this mean?
allowable expenses are allowed to be recognised to calc trading income to get to taxable income. If it is allowable it means it can be left alone (i.e. do nothing). These expenses were already removed to get to trading income, the dissalowable ones have also been removed, so add these back!
If disallowable you “add it back”. so you add it to the trading profit to get to the taxable amount. adding back increases the taxable amount.
depreciation charges?
Allowable of not allowable as a trading expense?
not allowable
relief given through capital allowances
losses on disposal of fixed assets?
Allowable of not allowable as a trading expense?
not allowable
relief given through capital allowances
improvement of an asset?
Allowable of not allowable as a trading expense?
disallowed.
wages and salaries paid to an employee?
Allowable of not allowable as a trading expense?
Allowable.
wages and salries to family members?
Allowable of not allowable as a trading expense?
Allowable - so long as the payment is reasonable for the work done and payments have actually been made.
traders paying their tax and NIC from the business account?
Allowable of not allowable as a trading expense?
These are drawings so dissallowable.
pension contributions from the trader?
Allowable of not allowable as a trading expense?
not allowable.
but relief given in personal tax contribution.
pension contributions made by the trader for his/her employees?
Allowable of not allowable as a trading expense?
allowable expense
general provision? and movement in stocks?
e.g. bad debt, stock obsolescence
Allowable of not allowable as a trading expense?
not allowable
specific provisions?
Allowable of not allowable as a trading expense?
allowable - as long as they are related to trading
trade bad debts?
Allowable of not allowable as a trading expense?
allowable.
staff entertaining?
Allowable of not allowable as a trading expense?
allowable
customer entertaining?
Allowable of not allowable as a trading expense?
Not allowable
what are the allowable gifts as a trading expense?
- Gifs to employees
- Gifts to customers no more than £50 per customer per year. Cannot be F&B and must contain ‘conspicious’ advertising
- trade samples to customers
- gifts of trading stock or used P&M to charities, sports clubs, or UK educational establishments.
Donations to national charities?
Allowable of not allowable as a trading expense?
not allowable.