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ACCA Applied Skills · Taxation (UK) · Income from self-employment

Which one of the following is an allowable deduction in computing the adjusted trading profit of a sole trader?

Wages paid to an employee who works in the business are an allowable deduction as they are incurred wholly and exclusively for trade purposes. A capital extension is disallowed, and payments to a spouse for no work are not for the trade purposes.

  1. ACost of a new extension to the shop premises
  2. BFine for a parking offence incurred by a delivery driver employee
  3. CSalary paid to the trader's own spouse for no work performed
  4. DWages paid to an employee who works in the businessCorrect

Explanation

Wages paid to an employee for the purposes of the trade are allowable. Capital expenditure on an extension is disallowed (though capital allowances may be available), fines for employee parking offences while working are not strictly relevant here, and payments to a spouse for no work lack a wholly and exclusively trade purpose.

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