Business deductions

In order to attract a deduction in computing the profits of a trade or business any expenses must be incurred wholly and exclusively for the purpose of the trade. Capital expenditure is not an allowable expense (capital allowances are claimed on these costs), and certain other expenses are barred by statute. However, there are a number of expenses which while deductible also have other favourable tax treatment.

	Note	2009/10	2008/09
Annual party
Exempt amount per head	1	£150	£150
Long service awards
Minimum term of service		20 years	20 years
Value of gift	2	£50 per year	£50 per year
Household expenses contribution
Per week amount	3	£3	£3
Relocation expenses paid to staff
Maximum amount	4	£8,000	£8,000
Works bus
Minimum number of seats		9	9
Customer gifts
Limit per gift	5	£50	£50
Childcare provision
Weekly limit	6	£55	£55

Notes

1. An annual Christmas party or similar annual event for staff is an allowable expense, and is not taxable on the staff attending provided the cost per head does not exceed £150. The excess is taxable on the staff attending as a benefit in kind.
2. This exemption does not apply to gifts of money. Subsequent awards must be more than 10 years after the last gift; the award is not taxable on the recipient.
3. Where employees work from home (including on an occasional basis) payments of up to the exempt amount in respect of additional household expenses are not taxable on them. If the employer chooses to make higher payments, they will be tax free if they do.
4. Staff in receipt of tax free relocation packages must meet a number of stringent conditions.
5. The gifts may not be food, drink or tobacco, and the limit applies to all gifts to the same recipient in an accounting period. VAT is also recoverable on gifts, subject to this financial limit, but the restriction of food, tobacco and alcohol does not apply.
6. The provision of full time care in a work place nursery is tax free on staff provided it is offered to all. Otherwise a contribution to the cost of care paid direct to the childcare provider under a contract with the employer, or through the provision or through the provision of childcare vouchers is tax free up to the weekly limit. Again, detailed conditions apply to this exemption.

The National Minimum Wage

An employer must pay their workers a minimum amount per hour as defined by law. This is called the National Minimum Wage (NMW).

The National Minimum Wage applies to all workers, with certain exceptions such as:

• those under the age of 16
• apprentices under the age of 26 during their first year of apprenticeship
• those who are genuinely self employed
• family members working in the family business
• people working and living as part of a family (e.g. au pairs)
• voluntary workers

National Minimum Wage Rates

From 1 October		2009	2008
		£	£
Adult rate		5.80	5.73
18 - 21 year olds development rate		4.83	4.77
16 - 17* year old rate		3.57	3.53

Note

*16 & 17 year old apprentices are exempt from the young workers rate.

Selected Benefit Rates

		Weekly Benefits
		2009/10	2008/09
Basic Retirement Pension
Single person (currently £4,953 p.a.)		£95.25	£90.70
Married couple (currently £7,919.60 p.a.)		£152.30	£145.05
Child Benefit
First eligible child		£20.00	£18.80
Each subsequent child		£13.20	£12.55
Guardian’s allowance		£14.10	£13.45
Statutory Sick Pay (SSP)
Average weekly earnings £95 or over (2008/09 £90)		£79.15	£75.40
Statutory Maternity Pay (SMP)
90% of average weekly pay		First 6 weeks
Maximum £123.06 (2008/09 £117.18). Minimum 90% average weekly pay		Next 33 weeks
Minimum rate		£85.50	£81.00
Adoption Pay (SAP)		39 weeks
Paternity Pay (SPP)		1 week or fortnight
Both SAP and SPP
90% of average weekly pay		Max £123.06	Max £117.18
		Min £85.50	Min £81.00
Jobseekers allowance
Single person		£64.30	£60.50
Married couple		£100.95	£94.95
Bereavement Benefit
Lump Sum		£2,000.00	£2,000.00
Bereavement allowance (standard)		£95.25	£90.70
Widowed parent’s allowance		£95.25	£90.70