Tax adjusted trading profit

Hi Sarah,
Its really a big topic. If you can specify which topic you would require guidance, probably i can try to sort it out.

Regards
Raj

Hi Sarah,

The computation of tax adjusted trading profit for both individuals and companies are similar.

The only difference you would find out about inviduals is that there might be a private use adjustment. However you wont find it in a company because it is not managed by a single individual.

A simple way to tackle your issue is just list out the disallowable expenditure and whenever you do a practice question, make sure these adjustment are there.

some of the adjustment I have listed below, these adjustment would be common for the both individual and companies. (Please note this is a inclusive list)

1) Business entertainment – 100% disallowed – Always add back to net profit
2) Capital expenditure – 100% disallowed – Add back to net profit and claim capital allowance.
3) Legal and professional fees on capital expenditure – 100% disallowed – Add back to net profit and [/b]DO NOT include in capital allowance
4) Depreciation – 100% disallowed – Always add back to net profit (except finance lease)
5) Capital allowance – Always deduct it from net profit.

There can be one adjustment for private individual who do business as sole trader. That would be related to use of goods for personal use.
In this case we would treate good withdrawn as goods sold and add the profit on goods withdrawn to net profit.

Hope this helps.

Please let me know if you have any other query.

Regards
Raj

Hi Raj,

I’m currently studying tax adjusted trading profits. You mentioned that depreciation is always 100% disallowed, except when finance leases are invloved… in the case of finance lease, how do you deal with them?