Allowable costs for tax purposes include the cost of goods
bought for resale including the cost of raw materials and
all costs of production after adjusting the cost of sales
for changes to the opening and closing stock of stock
including stores being held, work in progress and finished
stock.
The adjustments of opening and closing stock values being
to adjust the cost of sales to represent the cost price of
the goods included in sales turnover. Also included in the
calculated cost of sales are commissions paid and discounts
given to suppliers.
Contractor costs are allowable at the gross invoiced value
before deduction of any with holding taxes. Where sub
contractors costs and expenses directly produce goods or
services for resale they may also be considered for
inclusion in the cost of sales.
All employee costs are included as allowable costs at the
gross value paid including salaries and wages of both
employees and directors of the business and temporary staff
and consultants employed by the business. In addition to
the gross wages businesses may also claim employment costs
such as fees paid to employment agencies, bonuses paid to
staff and the costs and contributions made to pension
schemes on behalf of staff employed.
Employer national insurance and additional medical
insurances are allowable as business expenses.
Travelling and distribution costs are permissible business
expenses and include running costs of cars, vans and
lorries which would consist of fuel and servicing costs,
repairs, insurance, vehicle licence fees and membership of
breakdown organisations. Also included in travel costs
would be bus, train, air and taxi fares, and hotel room
costs including private accommodation and meals or
subsistence allowances in respect of food during the
business trip.
Allowable expenses fro property include business rent,
rates and other invoices for use of the property including
local government charges for general rates and water rates.
The cost of maintaining the property, repairs and
maintenance and environmental expenses include light, heat
and power costs plus expenditure on property insurance and
security arrangements.
The same costs as applicable to use of the home are also
claimable in so far as the extent of the use of the home
for business purposes.
Repairs and maintenance of tools and equipment would also
include renewals of smaller items of expenditure on tools
and equipment where these items had not been capitalised as
fixed assets.
General administrative costs of running the business would
include telephone and stationery costs, fax and mobile
phones, printing and postage, computer software and small
office equipment costs that have not been capitalised.
Other general costs may include trade and professional
journals and subscriptions including the expenses of
employees in respect of these items.
Advertising and promotion costs in all media areas such as
newspapers, magazines, websites, television, posters, mail
shots and free samples are allowable. Internet website
costs including hosting and promotion would be advertising
expenses.
Business bank interest payable including business loans and
financing arrangements on overdrafts and loans plus bank
charges and business credit card charges are claimable.
Other allowable expenses would include hire purchase
interest, leasing payments and other finance payments.
Financing costs also including the administration charges
for the potential various finance arrangements.
Legal and professional expenses to be claimed are
accountants, solicitors, architects, surveyors and other
fees from members of professional bodies including
professional indemnity insurance.
Specific sales income which has been included in sales
turnover in the current or previous years and remains
unpaid and unlikely to be recovered would be designated as
a bad debt and may be deducted as an expense but also has
to be written back if the money owed is subsequently
recovered.
Depreciation on fixed assets that have been capitalised and
the profit and loss on sale of assets are not claimable but
instead replaced with capital allowances which write off
the costs of those fixed assets over a period of years
according to the tax rates and rules applicable.
Any other costs properly incurred in the business may also
be claimed subject to specific items disallowed under the
tax authority rules.
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Terry Cartwright, accountant and CEO at DIY Accounting,
designs accounting software http://www.diyaccounting.co.uk/
on excel spreadsheets providing complete single and double
entry bookkeeping systems
http://www.diyaccounting.co.uk/bookkeeping.htm
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