Chapter 5 list of allowable/disallowable expenditure

Question 1

Capital income CB

Answer 1

Proceeds from sale of capital assets taxable excluding car land building
Market value of assets no longer in used is taxable

Question 2

Capital income gaap

Answer 2

not taxable

Question 3

Capital expenditure cash

Answer 3

1. (expenditure,legal feels, hire purchase fees, improvement, new asset that requires repairs to make it useable) allowable except car land building
2. depreciaton not allowable

Question 4

Capital expenditure gaap

Answer 4

All not allowable

Question 5

Maintainance and general repairs

Answer 5

BOTH allowable

Question 6

Payment of salary to soletrader, income tax/ NIC of soletrader, unreasonable remuneration to family members

Answer 6

Both not allowable, the extra remuneration is minus out

Question 7

General Provisions

Answer 7

Not applicable cash, not allowable for gaap

Question 8

Specific provisions

Answer 8

Not applicable cash
Allowable gaap

Question 9

Trade Bad Debts written off

Answer 9

Cash not applicable (auto bad debt relieft coz not recorded in accounts)
Gaap allowable

Question 10

non trade bad debts written off like loan to former employee

Answer 10

Not applicable to cash
Gaap not allowable

Question 11

Trade bad debts recovered

Answer 11

cash not applicable
gaap taxable

Question 12

Non trade bad debts recovered

Answer 12

cash not applicable
gaap not taxable

Question 13

Entertainment of staff,

Answer 13

Allowable both

Question 14

Gifts of trade sample (stock, not for resale) for example, clothing company give their clothes

Answer 14

allowable both

Question 15

Gifts to employee

Answer 15

allowable

Question 16

Gift to customers as advertisements

Answer 16

both allowable, but cannot exceed 50 per customer

Question 17

Customer entertainment

Answer 17

not allowable

Question 18

Gifts of food drink or tabacco or vouchers to customer

Answer 18

Not allowable

Question 19

Donations to local charity

Answer 19

allowable

Question 20

gift of trading stock or used plant and machinery to charities or UK educational establishments

Answer 20

allowable

Question 21

subscriptions to trade and professional associations

Answer 21

allowabel

Question 22

donations to national charities

Answer 22

not allowable

Question 23

donations to gift aid schemes

Answer 23

not allowable

Question 24

political donations

Answer 24

not allowable

Question 25

parking fines by an employee on business trip

Answer 25

allowable

Question 26

parking fines for sole trader

Answer 26

not allowabel

Question 27

penalties for late payment of tax

Answer 27

not allowable

Question 28

interest paid on money borrowed for business purposes

Answer 28

allowable

Question 29

interest paid on late payment of tax

Answer 29

not allowable

Question 30

legal and professional fees: collection of trade debts

Answer 30

Allowable

Question 31

legal and professional fees: employement issues

Answer 31

allowable

Question 32

legal fees preservation of trade rights

Answer 32

yes

Question 33

professional fees for preparation of accounts

Answer 33

yes

Question 34

legal cost relating to renewal of short lease less than 50 years

Answer 34

yes for cash and gaap

Question 35

incidental cost of raising long term finance

Answer 35

yes

Question 35

cost of registration of patent or copyright

Answer 35

yes

Question 36

cost of raising share capital

Answer 36

no because it is non trade

Question 37

legal fees for capex

Answer 37

yes for cash except car land bulding, no for gaap

Question 38

dealing with hmrc/ appeal to hmrc

Answer 38

no

Question 39

drawing up a partnership agreement

Answer 39

Yes for cash no for gaap

Question 40

irrecoverable vat

Answer 40

allowable as long as the capex is allowable for each respectively, if capex not allowable, then not allowable

Question 41

earnings of employee

Answer 41

allowable, but for gaap must be charged to accounts during accounting period if not paid after 9 months, charge to other accounting period

Question 42

reduncacy payments and compensation for loss of office( on cessation of trade, restricted to up to three times the additonal amount of statutory redundancy

Answer 42

allowable

Question 43

cost of educational courses fro employee

Answer 43

yes

Question 44

employers contribution to registered pension scheme

Answer 44

yes

Question 45

payment of nic of employee

Answer 45

yes

Question 46

accrued employer contribution to registered pensions scheme

Answer 46

NO, only allowable when paid for gaap, cash cant be accrual

Question 47

cost of hiring, leasing or renting plant and equipment

Answer 47

yes

Question 48

lease on car where co2 above 50g

Answer 48

allowable, disallowance of 15% for gaap

Question 49

drawings

Answer 49

disallowable, use cost for cash basis, use selling price for gaap