Read each question carefully and select the answer you think is correct (do your working to determine this as necessary). Once you have made your selection check if this is correct.
The charge for entertaining in the profit and loss account of Mr Zeus, a trader, includes the following items:
1. Christmas gifts to customers (bottles of wine costing £15 each carrying an advertisement for the business)
2. The cost of a staff annual party at £80 per head
3. The cost of entertaining customers at a Christmas party totally £1,000
Which of these items will be disallowed in Mr Zeus’s profit for Trading income purposes?
1 only
1 and 2
1 and 3
2 and 3
1, 2 and 3
The charge for legal and professional fees for Mr Amron, a trader, includes the following items;
- £600 - Renewal of 20 year lease on factory
- £200 - Fees for new lease of office building
- £300 – Agent’s fee for obtaining a new patent.
The amount to be disallowed in the Trading income computation is:
£1,100
£200
£800
£900
£500
Trevor Hancock is a small business operator who leases a petrol engine (non-hybrid) motor vehicle (original cost £20,000) with annual lease charges of £4,200 and CO2 emissions of 160g/km. The lease was entered into in 2020. The amount to be added back to his accounting profit in determining his trading income is:
£7,400
£20,000
£3,570
£4,200
Caroline conducts a business, as a sole trader, making and selling wicker furniture. During the year, Caroline appropriated a wicker table which cost £200 to make and would sell to the public for £450. However, instead of selling it, she instead gave the table as a gift to her sister, and did not account for this in her books of account. The amount by which her trading income will be increased is:
£nil
£450
£200
£325
Harold Evans is a sole trader whose bad debts account for the year ended 31 December 2021 is as follows:
Opening balance (all general) £35,000
Trade debts recovered during year £11,500
Amount charged to the income statement £17,000
Closing balance £40,500
The closing balance consisted of a general provision of £36,000 and a specific provision of £4,500. The amount disallowed in the trading income computation is:
£1,000
£5,500
£12,500
£17,000
£36,000
Alfred Betts traded as a joiner for many years and then retired in 2021. During the year ended 5 April 2022, he received £700 in final settlement of an old trade debt, which had not been written off, of £1,150. Alfred now wishes to write the rest of the debt off. During the year he also incurred the following expenses:
Professional liability insurance £700
Cost of remedial work £2,000
Which, if any, of these can Alfred claim for the year ended 5 April 2022?
£nil
£2,000
£2,700
£3,150
Which of the following is NOT chargeable as a trading receipt under trading income rules?
Compensation for a temporary restriction on the use of a business asset
Compensation for the cancellation of one small contract for a business that has many similar contracts.
Receipts for the sale of know-how by a continuing trade
Proceeds from the sale of plant and machinery used in the business.
A self employed taxpayer, who works away from his home, can claim the difference between the cost of meals prepared at home and those bought while working away as a deduction according to the trading income rules. Is this statement true or false?
True
False
Where a capital asset is acquired in a dilapidated condition, but is commercially viable and the price paid does not reflect the condition of the property, the cost of repairs may be claimed as a deduction from trading income. Is this statement true or false?
True
False
Where the proprietor of a business undertakes training to obtain new skills and expertise, the cost of the training will be allowable under trading income rules.
True
False
Suzie O’Neill trades as a milliner. She leases the shop from which her trade is conducted at an annual rent of £6,000. The 20 year lease commenced in 2020 and she paid a premium of £10,000 for the lease. What is the maximum trading income deduction in respect of this property for the year?
£6,000
£12,200
£6,500
£6,310
£nil
Which is the appropriate fiscal year for reporting purposes for a business (not a company) with a year ending 31 March, 2022? (assume not in an opening or closing year situation)
2019/20
2020/21
2021/22
2022/23
To be a deductible business expense for tax purposes the expense must be:
Wholly and exclusively incurred for the purpose of trade, not a capital expense and not specifically disallowed by statute.
Wholly and exclusively incurred for the purpose of trade, not a revenue expense
Wholly, exclusively and necessarily incurred for the purpose of trade
Not specially disallowed by statute and a revenue item
Patrick O’Malley lets a flat which he owns and received net rental income during the year of £6,000 and incurs expenses related to the flat (which are all allowable) of £4,000. He also lets a room in his house to a student for an annual rental of £3,000. Patrick makes beneficial elections and so will be assessed on:
£2,000
£5,000
£9,000
£5,250
Mary owns a building which she lets to tenants. She granted a 40 year lease on the property for a premium of £35,000. How much, if any, of the premium will be chargeable to Mary as property income?