Goof afternoon,
When being asked to calculate whether an individual is better off being a sole trader of limited company in term off NIC and Tax - do you have to deduct the personal allowance first THEN calculate the NIC and tax on that figure?
Also, VAT regarding reclaiming fuel - if a Ltd company, we can reclaim the whole amount, i.e. business and private, but offset the surcharge to reduce the liability? If its a sole trader, we can only re-claim the business fuel VAT along with the surcharge to reduce the liability?
Thanks,
Sean
Ask the Tutor ACCA TX-UK
Sole Trader V Ltd
You deduct the PA in calculating the income tax payable but NOT in computing NIC which is based on either the adjusted trading profit of the unincorporated trader or the employment income of the company employee
It does not matter whether you are dealing with a company or an unincorporated trader the rules apply to businesses! Hence the business may recover all the input tax on motor expenses and then charge output tax according to the fuel scale charge
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