Tx notes fa22 Final

Tax adjusted trading profit
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2.2. Typical expenditure by a business 
The general rule is that expenditure not wholly and exclusively for the purpose of the trade is not 
allowable:
(a)
Capital expenditure
including depreciation is not allowable;
‣
repair to an asset is revenue expenditure and is allowable.
‣
improvement to an asset is capital expenditure and is not allowable.
(b)
Reliefs, such as qualifying loan interest payments (see chapter 2) are not allowable as they are 
dealt with as a deduction from total income.
(c)
Irrecoverable/Impaired Debts
(Trade debt write o
ff
s & allowances)
‣
These are allowable; the tax treatment follows the accounting treatment.
‣
However non trade write offs are not allowable and so the expense is added back.
(d)
Entertaining and gifts 
‣
entertaining is disallowed, unless entertaining employees.
‣
gifts to employees are allowable but maybe included as an assessable benefit within 
employment income for the employee - see Chapter 9.
‣
gifts to customers are only allowable if;
•
they cost less than £50 per person per year, and
•
the gift is not food, drink, tobacco or vouchers exchangeable for goods and 
services
•
the gift carries a conspicuous advertisement for the business.
(e)
Subscriptions and donations 
‣
trade or professional association subscriptions are allowable,
‣
charitable donation (Not made under Gift Aid);
•
if it is small and made wholly and exclusively for trading purposes (eg promoting 
business’ name), and it is to a local charity then it is allowable.
•
National / international charity donations are not allowable.
‣
charitable donations (made under Gift Aid) are not allowable. 
‣
Political donations - these are not allowable.