Business Tax - Help Needed ASAP Pls!!!

Re:Business Tax - Help Needed ASAP Pls!!!

HMRC generally view legal fees in connection with the acquisition of leasehold premises as capital expenditure and should be added back to the trading profit. Note that any costs associated with acquiring a fixed asset whether premises or plant (including transportation costs) should always be capitalised. The £2k protective covers enhance a current fixed asset, the windows, and therefore would be classed as a fixed asset and as such should be added back to the trading profits.

Note you always ADD disallowed expenses to the net profit per the financial statements.

Hope that helps. If you ever forget what to do to calculate Schedule D1 profit always remember that the Revenue want the profits as high as possible (higher profits = higher tax)therefore the more disallowed expenses (in the Revenue's eyes) the better.

Regards
Steve

Re:Business Tax - Help Needed ASAP Pls!!!

It can be very difficult sometimes knowing what's allowable/not allowable. Sometimes there are a number of grey areas (especially in practical terms).

A typical "real life" example (just for future reference if you need it) is as follows:

A client of mine extended their factory and developed a new office block. This work went into hundreds of thousands of pounds and in view of the substantial capital allowances claim (in particular with reference to the first year allowances) I felt that a detailed review had to take place as to what was allowable (i.e. plant and machinery type items) and what was not.

One item in particular related to the purchase and fitting of roller shutters (your example above prompted me to refer to my real life scenario). My client had electrical roller shutters fitted to all the exterior windows and doors. Note the following:-

The cost of the roller shutters (the physical roller shutters) is eligible for first year capital allowances BUT

The electrical work involved in enabling the shutters to work is not.

Now do you know what I mean about "grey areas"!!

Kind regards
Steve

Re:Business Tax - Help Needed ASAP Pls!!!

Hi Dean,

They haven't actually repaired anything though. The covers for the windows are an addition to an existing fixed asset a bit like in my example with the shutters. If they had replaced the shutters then it may be classed as a repair but without that distinction it has to be assumed that the covers are additions.

Regards
Steve