do I calculate my taxable profit?
You calculate your taxable profits by deducting
allowable business expenses from your turnover.
is my turnover?
turnover is the gross amount of income earned by your business
before deducting any business expenses i.e. total amounts
earned from sale of goods, or provision of services. If you
are registered for VAT your figures in your accounts should
be shown excluding VAT.
happens if my business incurs a loss?
If you incur a loss on your business activities you can either:
off the loss against other taxable income in that year
- Carry the loss forward against future profits of the
expenses can I claim for?
You can claim for any business expenses which you have incurred
in order to earn your profits. These expenses are normally referred
to as revenue expenditure. Revenue expenditure is your day to
day running costs and covers such items as:
- Purchase of goods for resale
- Wages, rent, rates, repairs, lighting, heating, etc.
- Running costs of vehicles or machinery
used in the business
- Accountancy, certain legal and other professional fees
- Interest paid on monies borrowed to finance business
expenditure or items
- Leasing charges in respect of plant/equipment or vehicles
used for the business
about pre trading expenses?
A business can claim for certain pre-trading
expenses when calculating trading income.
Examples of pre-trading expenses are:
- Accountancy fees
- Costs of feasibility studies
- Costs of preparing business
- Rent paid for the premises from which the business
The allowable amounts are treated as having been incurred
at the time the business commences. Allowable amounts cannot
be offset against income other than that income from that
business but can be carried forward and set against future
profits of the business.
expenses can I not claim for?
The general rule is that you cannot claim for any private
expenses such as:
- Any expense, not wholly and exclusively paid
for the purposes of the trade or profession
- Any private or domestic expenditure e.g. your own wages,
food, clothing (except protective clothing) income tax etc.
- Business entertainment expenditure such as food and drink
or other hospitality expenses.
You cannot deduct capital expenditure
in calculating your taxable profits. However you can claim
about expenses which are partly business and partly private?
expenditure relates to both business and private use, only
that part which relates to your business will be allowed.
In such circumstances the expenses will need to be apportioned
to exclude the private use.
about motor expenses?
can claim a deduction for the running expenses in respect
of a vehicle used for business purposes. There are restrictions
applying if you are claiming expenditure for a car.
if I use my car for private travel?
When you use a vehicle for both business
and private purposes, a split of both the capital allowances
(allowance for wear and tear)and running expenses has to
Note journeys between your home and regular
place of work are treated as private and not business.
is capital expenditure?
is regarded as "capital" if it has been spent on
acquiring or altering assets which are of a lasting use in
the business, for example, the purchase of premises, or the
cost of plant, machinery or vehicles. You cannot deduct this
type of expenditure in arriving at your taxable profit.
You can however, claim
capital allowances on capital expenditure incurred on items
such as office furniture & equipment, plant & machinery,
vehicles and certain buildings. Capital allowances account
for the wear & tear on these items and are deducted from
your profit before you are taxed on it. Currently you can
claim all the expenditure in the year up to a maximum of £1,000,000
per year and any in excess is calculated at 18% per annum
on the cost of the asset on a reducing balance method. There
are special rules on the amount you can claim on cars.