UK Tax Questions? Ask a UK Tax Advisor for answers ASAP
Thanks for asking the question.
Im Vince and one of the tax advisors here.
The accounts treatment for the lease premium paid is capitalise the lease on signing the lease contract and then amortised by time apportionment over the life time of the lease which is 15 years. The rent expense is treated as usual - Dr Rental Expense Cr Cash/Creditor.
The clients then gets tax relief for a portion of the lease premium paid and the rent paid.
The amount of the premium that he will get tax relief on against profits of the trade profit is the amount of the premium that would have been taxed in the hands of the landlord.
The deductible element is 57,000 - 2% x (15-1) x £57,000 = 41,040
This amount is time apportioned over the lifetime of the lease. ie in one year you 41,040/15 = 2,736 deducted in your tax return.
Ok let me work out the numbers:
In the accounts, the full charge for the rental premium of 57,000 would be shown. However you would amortise the this over 15 years ie 3,800 every every year. For tax purposes you need to add back this amounts in your tax computation as non-deductible expense. At the same time you need to claim deductible amount as shown above of 2,736 instead.
Also note if this an individual then private use - adjustments may need to be made.
Also note that this is a trading expense like any other trading exense on the tax return.
You show the expense on the trading expense; and the amortisation added back in the amortisation section.
If you are using the company return you can put this through charges paid.
As this is not an accounting issue, it should not affect your P&L or B/S but just at a tax adjustment. That is why i aslo suggested that you can put this through other charges and put an explanaiton note.
Are you filing the self assessment online? I can assist you with the filing if this helps.
Im not sure what Forbes pro tax use - but if it was HMRC online assessment, you could simply deduct this in other Other tax adjustments and put a note. Im surprised there are no other adjustments section on your system.
Definately under "Business expenses" Rent, rates, power and insurance costs box 14/21 depending on whether short/long form. If not, other business expenses.
Leave this with me and i will get back shortly.
Thanks for your patience. I had a chance to chat with my fellow advisers here.
The problem of trying to input deductible expenses/non deductible expenses that are not in the accounting P&L on the self assessment return if you want to balance the balance sheet. A few of my colleagues suggested either of the following options which are acceptable to HMRC:
1 . Adjust the accounts by deducting the deductible rent premium before you file the return ie Dr Deductible rent premium Cr Asset - Rent Premium. That way your balance sheet on the return wont be affected. OR
2. Show the deductible rent premium in other boxes like capital allowances (and put an explanatory note).
3. Show the deductible amount net of amortisation ie since you need to add back 3,800 and deduct 2,736 ie add back only 1,064 (again put an explanatory note).
Hope this helps.
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