Schedule D Case 1 Tax

rathmaniacal

This is for the self-employed, right?
Recently I was given a question where I had to work out a person's Schedule D Case 1 tax adjusted profits. One of the expenses listed in the P&L was Directors' fees. Am I right in saying that this is not an allowable expense?
Also, a figure was given for pensions contributions (i assume it is for the employees and not the self-employed person): there was an ordinary contribution, which i assume is allowable; there was also a special contribution. Is this allowable too? Plus, isn't there also a tax relief available on a portion of the special contribution?

I would have thought that 'directors' would only apply to a company, rather than a case I trade or profession? I.e. Case I's are individuals, there wouldn't be directors involved.

Just a hunch..

Bren1609

ND 1978 is right, Diectors fees suggests a ltd company.

rathmaniacal

so Schedule D Case 1 only applies to sole traders?

Coala

Self-emplyed traders

rathmaniacal

Coala wrote: »

Self-emplyed traders

If some one has his or her own company wouldnt that count as being a self employed trader?

If someone has his or her own company, then it's a company!

If they have not incorporated as a company, then they are a sole trader.

Sole traders and company's are completely different in many ways, not least in the way they are taxed.

rathmaniacal

ND 1978 wrote: »

If someone has his or her own company, then it's a company!

If they have not incorporated as a company, then they are a sole trader.

Sole traders and company's are completely different in many ways, not least in the way they are taxed.

so in plain terms a person who has a company does not pay income tax under schedule d case 1?

rathmaniacal

rathmaniacal wrote: »

so in plain terms a person who has a company does not pay income tax under schedule d case 1?

Correct. A company pays Corporation tax, not income tax. Look for the word 'Limited' in the name of the business. If it is there, then corporation tax generally applies!

rathmaniacal

So (and I realize I am being a pain in the ass about this) if a guy has a company he would pay tax on his salary and things like BIK under Schedule E;the company would pay tax on its profits under corporation tax; and if the guy wanted to cash out down the line he would be subject to some other kind of tax (like CGT or something)?

rathmaniacal

rathmaniacal wrote: »

So (and I realize I am being a pain in the ass about this) if a guy has a company he would pay tax on his salary and things like BIK under Schedule E;the company would pay tax on its profits under corporation tax; and if the guy wanted to cash out down the line he would be subject to some other kind of tax (like CGT or something)?

Correct, although not sure the CGT bit. If he wants to take money further down the line, the 2 most popular ways in my experience are salary (taxable under Schedule E) or dividend (Schedule F). Either way, its income tax! Just different schedules.

I think the important point is that when someone owns a company, they are still liable for income tax in their own name as an individual, on top of the corporation tax that the company must pay.