TAXATION OF BUSINESS PROFITS FOR

UNINCORPORATED BUSINESS

BADGES OF TRADE
1. The Frequency of similar transactions
2. Supplementary work and marketing
3. The Length of the period of ownership
4. The subject matter of realisation
5. Circumstances giving rise to realisation
6. The taxpayer`s intention
In addition to the six badges of trade there are
additional 3 factors
• 1. The taxpayer`s other circumstances/activities
• 2. The way the asset sold was acquired
• 3. The method of finance
Computation of taxable business profits

K`000 K`000
Net Profit as per accounts X
Add:
(a) Expenses charged but not deductible
fot tax purposes X
(b) Taxable Income not credited to A/Cs X X

Less:
(c) Income credited to A/Cs but not taxable X
(d) Expenses for tax purposes not deductible
in the A/Cs X (X)
Taxable business profits X
The General Rule for Deduction of Expenses
• It must be revenue and not capital
• It must be incurred wholly and exclusively for the purposes of the business
• Goods taken for personal use
• Bad Debts - Trading losses
• Appropriation of profits - Pre trading expenditure
• Defalcations
• Payments to family members
• Gifts and entertainment
• Travelling expenses
• Fines
• Subscriptions
• Charities