Just preparing a tax return and there is 10% private usage on the motor expenses. As I normally go the 45p route it's just occurred to me how I deal with it in the accounts
a. Show expenses in full and show the 10% deduction on the tax return.
b. net figure on the accounts and just net on the tax return.
c. Show the gross figure in the accounts plus a line for the amount disallowed and ditto on the tax return
Just read an interesting discussion on aw about it and there were some differences of opinion on how to treat it.. I'm swayed equally by the following two arguments things like cost of vehicle (van) road tax and insurance are fixed costs whether you were deducting 10% or 50% so should be treated gross but then fuel accurately reflects private mileage so should be treated as such in the accounts.
My choice is probably c with some sympathy for a (b im not keen on at all) but wondered what others thought?
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
I haven't read the AW article but it seems to me that it depends how much or little you want to tell the Revenue. Then again, if you only give them the claim figure (without the total and add-back), they know that you're giving them the bare information. The same goes for giving 3 line accounts: either way, I don't suppose they have the staff to study the psychological profile of the person submitting the Return.
Due mostly to training, my preference is to show the gross in the accounts and to have a separate profit computation giving add-backs. Ditto with the Return where it's actually easier for me to export totals and disallowable than to complete the Supplement any other way.
Now and again, I've deliberately prepared subsequent years using Net only or 3 lines.
No rationale other than that's the the way I have always known it to be. Full cost shown then disallow private element
I know what you mean if you are showing all cost in the accounts but then disallow say 50% then the accounts doesnt show the business cost.
At the end of the day whether you show all the cost and disallow the non business element or just show the business element the end result is the taxable profits are right.
