Deduction notes - Profits Tax Deductions A Main provision...

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1 Profits Tax: Deductions A. Main provision for deductibility: IRO s.16 (P.177 Casebook) Section 16(1) provides for deduction from chargeable profits: all outgoings or expenses incurred during the year of assessment to the extent to which they are incurred in the production of chargeable profits for any period B. Expenditure not deductible: IRO s.17(1) (PP.177-178 Casebook) (a) Domestic or private expenses (b) Disbursements or expenses not being money expended for the purpose of producing chargeable profits (c) Expenses capital in nature or loss/withdrawal of capital C. Issues to resolve for determining the deductibility of an expense item under IRO ss. 16(1) and 17(1) (a) Has the expense been incurred? (PP.178 – 184 Casebook) (b) Effect of accounting principles/standards on the deductibility of an expense item? (PP. 184 -187 Casebook) (c) To what extent was the expense incurred in the production of chargeable profits? (PP. 188 – 200 Casebook) (d) Was the expense capital in nature? (PP. 200 – 212 Casebook) (e) Was the expense domestic or private? (PP. 212 – 215 Casebook) (f) Special deductions (ss. 16A through to 16I) (PP. 215 – 220 Casebook)
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