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sir why interest receivable is deducted when calculation tax adjusted trading profit and national charity donation is added back. aren’t we suppose to deduct charitable donations?
Hi Sasha I think I may have asked this question before but have you worked through the lectures along with the notes?
Your queries are to do with calculating the adjusted TRADING profit from the accounting profit given in the question:
1) Is interest income trading income? No it is not, so that anything credited in the accounting profit that is not trading must be removed in the adjustment of profit exercise and if, as in the case of interest income it is also chargeable to corporation tax then it is placed separately on the corporation tax computation as interest income.2) You say aren’t we supposed to deduct (qualifying) charitable donations – yes we are but not in calculating the adjusted trading profit, they are deducted separately as you will see in the proforma computation from TOTAL PROFITS, hence why we must add them back in the adjustment of trading profit and show them instead as deductions from total profits
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