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Tax

Adjustments to profit

QuestionAnswer
treatment for non-allowable expenses added back to net profit to calculate taxable income
general rule of thumb for non-allowable expenses if it is not wholly and exclusively for the purpose of trade it is not allowable (thus needs to be added back)
fairly conclusive list of non-allowable expenses (part 1) a. depreciation b. improvements to assets (not repairs - upgrades) c. non-qualifying loan interest d. trade receivable, non-trade write offs e. entertainment - other than employees f. gifts to customers ( £50/y allowed) - no food, drink or tobacco
fairly conclusive list of non-allowable expenses (part 2) g. political donations h. charitable donations made under gift aid i. leases on cars with C02 emissions > 110g/km j. fines - unless reimbursing employees k. non-business use of assets (personal use) l. owners salary m. interest on overdue tax
fairly conclusive list of non-allowable expenses (part 3) n. salary paid to family members above commercial rate - add back at market rate o. goods taken for personal consumption
3 types of capital allowance annual investment allowance writing down allowance first year allowance
annual investment allowance allows.. all businesses to write off first £1m they invest on allowable assets
writing down allowance allows... if capital expenditure exceeds AIA or is exempt then they go into WDA pools
WDA pool rates main pool - 18% special rate - 6%
national insurance classes and who they are paid by class 1 - paid by individual in employed position class 1a - paid by employer class 2 - fixed weekly amount (paid on NSI except employment) class 4 - % of profits (paid on NSI except employment)
do businesses treat special pool and main pool assets differently during the AIA accounting businesses will prioritise special rate assets if possible to be able to write off larger amount of WDA further down the line
Created by: amyperston
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