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Hello
This is in relation to Chapter 4, lesson 2. It is to do with owners taking goods for their own use.
I completely understand what is required, eg add back market value (£1000), if already accounted for (removed £600 purchase price) then add back only the “lost” profit (£400).
My question is what is the reasoning behind this? I know you say things are not a “why”, but I really don’t understand the logic behind paying tax on this £400. I understand this will not be asked in the exam, I am just curious.
Thanks
MichaelI cannot tell you why whoever introduced that rule did so – for reasons as previously stated!
Legislation is often introduced, however to deter certain behaviour so that it’s possible that HMRC wanted to discourage traders from buying for personal consumption through the business not the least because the trader may be tempted not to declare this in their tax returns.
With this rule if it is discovered that any such goods were taken then it will have the effect of increasing the taxpayer’s tax bill and therefore discourage that activity.
There again it may be some other reason!!
Now focus on learning what you need to pass this exam!
Enjoy!!
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