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Allowable costs for tax purposes include the cost of goods bought for resale including the cost of raw materials and all costs of production after adjusting the cost of sales for changes to the opening and closing stock of stock including stores being held, work in progress and finished stock.

The adjustments of opening and closing stock values being to adjust the cost of sales to represent the cost price of the goods included in sales turnover. Also included in the calculated cost of sales are commissions paid and discounts given to suppliers.

Contractor costs are allowable at the gross invoiced value before deduction of any with holding taxes. Where sub contractors costs and expenses directly produce goods or services for resale they may also be considered for inclusion in the cost of sales.

All employee costs are included as allowable costs at the gross value paid including salaries and wages of both employees and directors of the business and temporary staff and consultants employed by the business. In addition to the gross wages businesses may also claim employment costs such as fees paid to employment agencies, bonuses paid to staff and the costs and contributions made to pension schemes on behalf of staff employed.

Employer national insurance and additional medical insurances are allowable as business expenses.

Travelling and distribution costs are permissible business expenses and include running costs of cars, vans and lorries which would consist of fuel and servicing costs, repairs, insurance, vehicle licence fees and membership of breakdown organisations. Also included in travel costs would be bus, train, air and taxi fares, and hotel room costs including private accommodation and meals or subsistence allowances in respect of food during the business trip.

Allowable expenses fro property include business rent, rates and other invoices for use of the property including local government charges for general rates and water rates. The cost of maintaining the property, repairs and maintenance and environmental expenses include light, heat and power costs plus expenditure on property insurance and security arrangements.

The same costs as applicable to use of the home are also claimable in so far as the extent of the use of the home for business purposes.

Repairs and maintenance of tools and equipment would also include renewals of smaller items of expenditure on tools and equipment where these items had not been capitalised as fixed assets.

General administrative costs of running the business would include telephone and stationery costs, fax and mobile phones, printing and postage, computer software and small office equipment costs that have not been capitalised. Other general costs may include trade and professional journals and subscriptions including the expenses of employees in respect of these items.

Advertising and promotion costs in all media areas such as newspapers, magazines, websites, television, posters, mail shots and free samples are allowable. Internet website costs including hosting and promotion would be advertising expenses.

Business bank interest payable including business loans and financing arrangements on overdrafts and loans plus bank charges and business credit card charges are claimable. Other allowable expenses would include hire purchase interest, leasing payments and other finance payments. Financing costs also including the administration charges for the potential various finance arrangements.

Legal and professional expenses to be claimed are accountants, solicitors, architects, surveyors and other fees from members of professional bodies including professional indemnity insurance.

Specific sales income which has been included in sales turnover in the current or previous years and remains unpaid and unlikely to be recovered would be designated as a bad debt and may be deducted as an expense but also has to be written back if the money owed is subsequently recovered.

Depreciation on fixed assets that have been capitalised and the profit and loss on sale of assets are not claimable but instead replaced with capital allowances which write off the costs of those fixed assets over a period of years according to the tax rates and rules applicable.

Any other costs properly incurred in the business may also be claimed subject to specific items disallowed under the tax authority rules

Terry Cartwright, CEO DIY Accounting, a qualified accountant in the UK, designs Accounting Software on excel spreadsheets and Payroll Software for small to medium sized business providing a complete accounting solution and also supplies Company Formation packages for new limited liability companies

Everybody wants to keep as much of the money they earn as possible. Those people in the higher income brackets are forever looking for a way to protect their money from the income tax collectors.

Thus, the idea of personal tax shelter, the thing is, how can you tell which ones are the good ones, and which ones are the bad ones. - Tax shelters can certainly ‘keep your money out of the hands of the IRS’ - but some of them can cost you dearly as well.

Generally, all real estate purchases have definite tax advantage. In even the simplest kind of transaction such as buying a better home for your family, you’ll be able to deduct from your gross income the amount you pay in mortgage interest and property taxes.

If you rent out your old house, or buy a house as a rental property, you’ll be allowed to deduct all your expenses from the rent you receive. You can also deduct the depreciation on the house, based on the cost or on the market value at the time the house was converted to a rental property, whichever is lower.

You also have the option to compute your depreciation over 15-years, which would probably give you a tax loss even though the property is producing a cash income for you. Remember though, you cannot claim a depreciation on the value of the land, only for the cost of the house.

Until 1981, you could not deduct losses on a property rented to relatives - however that rule has been repealed and now makes family tax savings available in certain situations when you rent to relatives. Be sure to check with your local IRS office for complete details.

So-called Clifford Trusts are tax shelters that shift the gross income of a company or family bread-winner to other family members in lower tax brackets. An income-producing property is transferred to a trust which must be set up to last 10 years and a day. The beneficiary receives the income during this period, and then the property reverts back to the grantor.

This type of trust is often used to accumulate money for children, who can use it for higher education or for a start in a career or business of their own. You should bear in mind when setting up such a trust however, that parents have a legal duty to support their minor children and thus, a trust cannot be set up to be used for that purpose.

Equipment Leasing Programs are another common income-sheltering method. Most of these programs can be combined with a trust. Here’s how they work: The owner of a business sets up a trust for a family member. Business property or equipment is transferred to the trust, and then leased back to the business. The trust gets the income, and the business gets a deduction for the rental fees it pays.

From another angle, the trust could buy equipment for lease to the business and get deductions for interest and other expenses involved. Investment tax credit can also sometimes be claimed in non-net-lease situations.

Making interest-free loans is another method of sheltering one’s income. Say you lend several thousand dollars to a son or daughter who invests the money. The borrower gets the income, and you eventually get your money back. If you’re in the 50% tax bracket and the borrower is in the 25% bracket, your tax savings can be considerable.

Investing in municipal bonds is very definitely a means of sheltering your income. Income from these bonds is tax free, but it’s generally lower than from other types of investments. Municipal bonds pay at a fixed rate of interest. Relative to other kinds of investments you could make, you’ll lose on Municipals if interest rates go up, and win only if the interest rates on other investments go down.

By now, everyone knows about IRA’s and Keogh plans for the self-employed. You put money into a personal retirement trust and pay no taxes on it until you actually withdraw from it. Some companies give their employees a chance to set up their own retirement accounts, thereby deferring part of their gross incomes until after they retire.

However, deferring income until after one retires is no longer as attractive as it used to be, particularly if your tax rate is not expected to change after retirement. If you don’t anticipate a lower tax bracket after you retire, it’s generally better to take all your income now and invest it in high yield growth funds that will mean more money for you in your retirement years.

There are innumerable ways and methods to shelter your gross income from the tax collectors, all of them legal. The important thing is to check them out with your tax preparer and decide which would be best for you.

Uchenna Ani-Okoye is an internet marketing advisor.

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The costs of goods, materials or services purchased by a business which are for private use are not allowable for tax purposes. The disallowed element also applies to goods and materials bought for business use which are subsequently used for private use.

Payments made by the business for none business work are not allowed.

A limited company can claim the wages and salaries of directors as a valid business expense. If the business is self employed then the proprietors own wages and drawings are not allowable as business expenses as such costs are distributions of the net taxable profit and not deductions from it. Also included in this category of disallowed expenses relating to the proprietor wages would be national insurance contributions, income tax payments and pension contributions

Pension contributions are an allowable personal expense which the small business owner would claim as tax deductible from the overall tax burden but not in the self employment accounts.

Motoring costs are a specifically defined area of non business expenses. Private use of the vehicle which may be used for business purposes is not allowed for tax purposes. Also disallowed are motoring fines including parking fines, any legal costs involved. The capital cost of buying private vehicles is not an allowable expense and also disallowable are travel costs from home to place of work and meals not associated with business travel.

The cost of any non business premises or non business part of the premises is disallowed for tax claims. The capital purchase price of premises is not allowed as a tax deduction as such purchases are treated as capital assets and subject to the tax rules applying to fixed assets.

Repairs of non business parts and equipment are not allowed as claims against tax liabilities. Costs of improving or altering premises or equipment are not allowed as tax deductions as these costs are added to the fixed asset costs and claimable under the capital allowance rules.

Non business use including private use of telephones, faxes and computer equipment and other hardware items are disallowed fore tax purposes.

Entertainment expenses of clients and suppliers are not allowed for tax purposes. Also disallowed are expenses incurred for meals of non employees who accompany the business owner on business trips unless that person has a valid business reason for being on the trip. Hospitality is generally not an allowable expense although entertainment of employees at Christmas or special events is allowed within restricted financial limits.

The capital element when repaying loans, overdrafts or other financial arrangements are not allowed as business expenses as these items are balance sheet items and not profit and loss items, the profit and loss being the calculation of the net taxable profit.

Bad debts represent an area where specific rules apply. Specific identified bad debts are allowed for tax purposes but general bad debts where a percentage is applied to the sales value as likely to become bad debts is not allowed as a tax deduction. Debts which have not been included in sales turnover are not allowed as such debts have not been accounted for and also bad debts on fixed assets are not allowed as the loss is accounted for in the capital allowances calculations.

Legal costs of buying property or equipment are not allowed for tax purposes as such costs are treated as capital expenditure and included in the purchase price of the asset and subject to capital allowance rules for reclaiming allowances over the life of the asset. Costs of settling tax disputes are not allowable and also fines imposed upon the company bare not allowable tax expenses.

Depreciation of fixed assets is a management decision and not allowable for tax purposes. If depreciation is deducted from the management accounts to report the net profit for tax purposes the depreciation is then added back as the allowable tax claim is the capital allowance applicable to those capital fixed assets. Same with profits and losses on the sale of fixed assets which are accounted for under capital allowances.

Specific work uniforms and clothing is allowable whereas ordinary clothing albeit suitable for the work being carried out is not allowable.

Small self employed business may not claim donations to clubs, charities, associations or political parties are not allowed for tax purposes. Subscriptions to trade associations which could be connected to the business objectives would be allowable as being for business purposes.

Terry Cartwright is a qualified accountant in the UK designs Accounting Software on excel spreadsheets providing complete Small Business Accounting Software solutions for with single and double entry Bookkeeping solutions for limited companies and self employed business

Tax authorities are often relaxed about the need for small business to prepare and produce formal accounting records. Often the requirement is simply that each business retains sufficient financial records to support the accounts submitted.

Such advice from tax authorities places a burden upon small business in that the vast majority are honest hard working people who are meticulous about keeping accounting records of sales made during the financial year. Unfortunately many small businesses are not so meticulous about keeping financial records of business expenses in their accounts.

A typical taxi driver may for instance keep a diary and record the daily receipts from his fares. If those recorded receipts are accurate then the total sales turnover for the year will show the correct total. The same may not be true of expenses and the accounts thereby overstated.

The total business expenses of the taxi driver would mainly include the fuel receipts plus the other running costs of the business. Typically a receipt for fuel will be obtained and kept in a file or shoe box. Some may get mislaid and lost and be missing from the final accounts preparation.

Other receipts for miscellaneous items may not even be retained as forgotten, lost or not thought of at the time of purchase. Examples may be purchase of the diary in which sales records are kept, business cards, other stationery, and cash payments for a whole variety of miscellaneous items.

The same practise is also often applicable to not just taxi drivers but many small businesses.
A small business owner may visit a supermarket for groceries and also buy an item of stationery for business use the cost of which is lost when the grocery receipt is discarded. If close attention is paid then the stationery item could have been obtained on a separate receipt and the cost of the journey to purchase it also included in the business expenses.

The stationery item is just one example which could be multiplied hundreds of times with hundreds of different items during the financial year. While each item missed and unrecorded may not be significant the total could well be sufficient to significantly reduce the year end tax burden by lowering the net taxable accounting profit.

Having retained a separate receipt for everything it is useful if the receipts are filed and the bookkeeping system employed updated at least once a month and preferably each week. By updating the accounting records on a regular basis more expenses will be recorded as the memory will remember recent expenses more clearly and accurately.

Another useful method to ensure all business expenses are maximised is to keep a daily diary of all expenses incurred. Use the entries in the diary when updating the bookkeeping records to ensure nothing has been missed in the accounts.

The essential message is to be meticulous about keeping receipts for everything, no matter how small, and recording both income and expenditure on a regular basis so that items are not lost or forgotten and included in the bookkeeping records. By also keeping a diary of financial records even if a receipt has been mislaid the amount should still be included in the accounts. It could be disallowed later if the tax records are enquired into but that is a matter of negotiation with the tax authority from a standpoint where the financial records are correct.

In addition all small business should take some time to review all potential expenditure which can be claimed under the tax rules. Many valid expense items can be missed having been dismissed as ordinary expenses which may be business related and therefore claimable in the financial accounts.

Terry Cartwright is a qualified accountant in the UK designs Accounting Software on excel spreadsheets providing complete Small Business Accounting Software solutions for with single and double entry Bookkeeping solutions for limited companies and self employed business

When you incorporate an offshore company in Seychelles, there is no such thing as a Seychelles Tax!

Information Seychelles:

Located in the stunning waters of the Indian Ocean, northeast of Madagascar and 1,600 from Kenya, the Republic of Seychelles is a paradise in many ways. There are 115 small islands that make up Seychelles, and these islands are unknown to many people today.

Seychelles offers a wealth of prospects in terms of investment opportunities, recreational activities and overall quality of life. It is now one of the worlds most recognized tax havens, because there is no Seychelles tax, offering strong competition to those well known tax havens located in the Caribbean.

That is right. It is a tropical haven, and because of no Seychelles tax, a tax haven as well, one that offers a world of opportunities. This country might look tiny on the map, but it is fully equipped with excellent communication systems, well developed infrastructure and exceptionally appealing investment opportunities that many business people are beginning to capitalize on.

Zero Seychelles Tax Companies:

It has some of the most enticing and appealing offers making it a first choice destination a zero Seychelles tax. It is an increasingly popular tax haven, so much so that in July 2004 the Seychelles International Business Authority (SIBA) was established, to help and this authority regulates all offshore company activity.

There are two types of tax haven companies in Seychelles:

1) The zero Seychelles tax International Business Company (IBC) and

2) Low tax Special License Company

The different between the two is that the first pays no Seychelles tax on income generated overseas, while the second pays 1.5% on income generated overseas. The Special License company is a tax resident company in Seychelles, which can sometimes lead to easier business undertaken overseas, and can take advantage of the Double Tax Treaties that Seychelles has with several other countries.

However in terms of competitiveness, a tax free International Business Company in Seychelles is considered one of the best. Not only is the Seychelles International Business Company [IBC] easy to form, but there are also other perks associated with it.

Investors benefit from:

* Fast services

* Low cost of incorporation seychelles

* Strict confidentially protected by law

* No information sharing agreements

To set up a tax haven company is straight forward and simple at Seychelles. Companies can be registered in English or French, and the name of the company can be in any language so long as it has a subsequent translation.

Other advantages of seychelles offshore company formation:

* There is no minimum capital requirement for a zero Seychelles tax company.

* This company is extremely flexible in many ways, for example an IBC can choose whether it wishes to hold annual meetings. Directors meetings are not a requirement. However they can be held in Seychelles if desired.

* IBCs only need one director, more if desired, however this is not a requirement

* IBCs can have directors and shareholders of any nationality and be residents of any country.

* The IBC can engage in business which is legal in any country and in whatever currency, however business can not be undertaken with residents of Seychelles.

And the tax benefits:

One of the best thing about having a seychelles offshore company formation is the no tax policy. IBCs are completely exempt from all taxes on income derived outside of the Seychelles.

Investing in Seychelles offers so many advantages. Enjoy stringent privacy, see your wealth increase, open bank accounts in your companies name. Everything is possible, and it is easy to implement! Let us not forget that Seychelles is not only a tax haven, but it’s also a tropical haven offering the ideal lifestyle.

The Republic of Seychelles:

Capital: Victoria

Currency: Rupee

Language: There are three official languages in Seychelles. Creole, French and English.

Total land occupancy: 455.3 square kilometers.

Population: 81,000

Government: Seychelles is a Republic, and it is members of the Commonwealth, La Francophonie, the United Nations, the African Union. The President is the head of state.

Brief History: Seychelles was initially colonized by the French, however in 1814 it became territory of Britain. In 1976 Seychelles achieved its independence from Britain. Today Seychelles enjoys her independence while being a republic in the commonwealth. The Republic of Seychelles offers everything from attractive investment opportunities to fun recreational activities!

Ramapati Singhania specializes in creating and managing web businesses. His latest website http://www.incorporation-offshore-saves-wealth.com focuses on helping you to incorporate offshore companies in Seychelles, Mauritius and BVI. You can also visit his blog, http://www.ramapatisinghania.com

Anyone in business in the UK who is not incorporated into a limited company must complete a tax return of their financial affairs each year. For a number of years the specific tax return to be completed by everyone self employed was the self assessment tax return.

The new self employed tax returns were introduced quite late in the reporting process being published at around the end of the financial year, to which they relate, 2006 07. This should not be a problem to those familiar with the previous small business tax return as the format is similar and presented in a simpler way to facilitate better understanding and accurate completion.

Self employed businesses are not required to keep formal accounts of the years financial transactions but must keep sufficient financial records to justify and support the financial entries made on the tax returns. While formal financial accounts may not be essential requirements an organised system of record keeping using bookkeeping or accounting software is highly desirable to maintain financial control.

The accounting system employed can be simple lists of financial records supported by sales invoices, purchase invoices and where applicable cash or bank records. The essential support to all bookkeeping procedures are third party documents received or issued to provide a full and fair financial account of the business.

There are a number of rules to be taken account of as to whether the full version of the tax return should be completed or whether the short version applicable. Generally most small businesses with an annual turnover under 64,000 pounds would complete the short tax return however there are specific exclusions where the full return must be completed.

The self employment (full) tax return is required to be completed when the following conditions apply and the self employment (short) tax return is required where the conditions do not apply.

1. Sales turnover exceeds 64,000 pounds during the financial year or exceeds an average of 5,333 pounds per month if trading for less than a full financial year.

2. The accounting date to which accounts are made up has changed in the last financial year.

3. The financial accounts have been declared in a previous tax return.

4. The basis on which the accounts have been prepared has changed from a cash accounts basis an accruals basis.

5. The self employment includes the provision of contracts that continue into the following financial year.

6. Business is conducted outside the UK.

7. Agricultural or Industrial Buildings capital allowances are being claimed.

8. The self employed basis period is different to the accounting period.

9. Overlap tax relief is being claimed.

10. Averaging profit is being claimed by a farmer, market gardener or creator of literary or art works.

11. Practising barrister or advocate in Scotland.

If none of the above conditions are applicable to the self employed business then the self employment short tax return may be completed.

The short tax return is a simplified version of the full tax return. The main decision point being the 64,000 pounds limit at which a full return is required which is also the vat threshold for the financial year 2006 07. While a future policy announcement has not yet been formally made it could be the cut off point may be changed each year in line with movements in the vat threshold.

For the financial year commencing April 2008 the vat threshold was increased sales turnover of 64,000 to 67,000 pounds.

The short tax return also has an option to declare total expenses as opposed to listing expenses under expenditure type categories where the business income is less than 30,000 in the financial year.

Finally if the self employed person has more than one small business a separate tax return must be completed for each business. This rule applies even if a single set of accounting records has been kept for all the businesses. It is therefore appropriate for separate accounting records to be maintained for each small business to simplify the completion of the tax returns each year.

Terry Cartwright, qualified accountant, produces Small Business Accounting Software and Payroll Software for self employed business written on excel spreadsheets to provide a simple Bookkeeping solution that automatically completes an excel copy of both the short and full versions of the Self-employment tax returns.