Corporation Tax - deductions ?

[FlashmanChop]

Hi ladies and gents,

are any costs deductable from corporation tax?

Just set up,as a Ltd Company, and VAT, and was wondering, as currently have plenty of advertising costs, my milage (which I am doing at 40p/mile, and a salary for myself - but currently only planning on the personal allowance c.£5,700)

what costs, if any, are dedctale from the 21% corporation tax?

Many Thanks

ETA

in essence, if I receive £10,000 payment, am I able to deduct anything priorto deduction of c tax, or is it £10k, minus 21% minus costs etc

[David Griffiths]

Corporation tax is calculated on the gross income less allowable costs. So in the example given, from the £10k you deduct the advertising costs, salary for the period and mileage before applying the 21% rate

For a cost to be deductible, it must be "wholly and exclusively" for the purpose of the company's trade. In practice that's most genuine business costs for a company. However, some costs that the company can deduct might be taxable on a director or employee - excessive mileage costs for a start.

There are some exceptions. You can't deduct business entertainment, or capital expenses - purchase of assets for use in the business, although there is a separate mechanism to claim what is known as capital allowances on some of this expenditure. Other capital items include repayments of loans (as opposed to interest) There are also odd rules applicable to interest paid in some circumstances.

That's in a nutshell and of course there are loads of ifs, buts and maybes! :)