Please enable JavaScript.
Coggle requires JavaScript to display documents.
Chapter 07 - Trading income - Coggle Diagram
Chapter 07 - Trading income
Badges of trade: Following tests to assess individual income under trading income rules
Subject matter: type usually trade
Frequency of transactions: more frequent indicates trade
Length of ownership: short period of ownership indicates trade
Profit motive: indicates trade
Supplementary work and marketing: indicates trade
Manner in which assets were acquired: If inheritance then sold indicates non-trade
Adjustment of profit
Net profit in accounts + Expenditure not deductible for tax + Non trading expense - Item not taxed as trading income (income assessable under other categories and non-taxable income) = Adjust profit - Capital allowance = Taxable trading profit
Expenditure not deductible for tax
Capital expenditure including
Depreciation
Legal/professional fees on capital transactions
Loss on disposal non-current asset (gains are deducted)
Qualifying interest
Adjustment to general provisions/allowances
Third party entertaining
Gift to customer unless
Cost <50 per head per annum
Bear company logo
Not food, drink, tobacco or vouchers
Private expenditure of the owner
Charitable and political donations
Tax appeals/other legal and professional expense
Leased motor cars with CO2 emission > 110 grams: 15% of leasing cost not deductible
Expenditure not wholly and exclusively for the purpose of the trade
Pre-trading expenditure
Incurred 7 years prior to commencement
Treated as trading expense incurred on the first day of trading (if deductible)
Cash basis for small business
Unincorporated business with revenue < 150,000 has option to use cash basis instead of accruals basis
Can use until receipts in previous tax year > 300,000 and this year >150,000
When using cash basis for TX-UK, certain expense can be compute on a flat rate basis
If cash basis produce a trading loss: carry loss forward against future trading profit