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1.The accounting profit must be adjusted for the private expenditure of the business owner. If the owner uses a car in the business and 20% of his mileages private, then only 80% of motor expenses are allowable. However if the owner provides an employee with a car, and 20% of the mileage is for private use by the employee, then the full amount of motor expenses is allowable.
can u plz give me example?The general rule for self-employed is that if an expense is wholly and exclusively used for business purposes it is allowable as deduction for tax purposes.Notice this is more flexible rule than rule for employees where generally for expense to be allowable it has to be wholly, exclusively and necessarily needed as part of job.For your above example if a sole trader pays employee two thousand pounds worth of fuel in year this whole amount will be deducted as expense from trading profit regardless of amount relating to business use.If ,however, same amount paid in fuel for own car but twenty per cent relates to private then only one thousand six hundred pounds will be deducted from trading profit as valid expense- 80 per cent of two thousand pounds.
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