Is there a difference between relief and allowable expenses?

Is there a difference between relief and...

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Is there a technical difference between tax relief and allowable expenditure?

Is 'allowable expenditure' technically a specific type of tax relief, or is it a different thing?

Is it correct to say: when you work out gross income, it is before tax is taken or relief is applied but after allowable expenditure has been deducted?

I feel that the difference is that tax relief is being let off for something that you would normally have to pay tax for but expenses are your costs incurred in the revenue process before you get to the issue of tax or tax relief.  Are the two legally distinct?  Is there any document or case that confirms this?

Please clarify or tell me if i'm wrong.

Thanks

Replies (7)

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By Duhamel
15th Nov 2014 00:07

In short...
...yes. The long answer will likely be more clear if you tell us the reason behind your question.

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Replying to lionofludesch:
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By lazysunday
15th Nov 2014 00:43

Thanks for your answer.

I am trying to ascertain what is included as 'gross income' for the purposes of old style student loan deferment.  The borrower must demonstrate every year that his 'gross income' falls below the deferment threshold.  There are 2 possible answers, the gross income = turnover i.e. total receipts.  Or, gross income = pre tax profit i.e. total receipts - allowable expenditure.

In my opinion, the 'gross income' should not include allowable costs that are incured in pursuance of the income because without first incurring those costs, there would be no income at all.  Secondly, in an extreme case, the borrower's total turnover may exceed the repayment threshold but due to high overheads, he is making a loss and cannot afford to make repayments.

The Student Loans Act 1998 defines 'gross income' as income "before deduction for or relief from tax".  So, that's why it matters whether allowable expenses fall under the definition of being a type of 'relief'.

I hope that clarifies.

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By petersaxton
15th Nov 2014 07:17

"Gross income = turnover"?

Is this for self employment?

Surely, in that case they would want profit before tax?

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By ShirleyM
15th Nov 2014 07:25

Gross income

In this context it means the gross of all income, so if you have more than one source of income you add them all together.

Before tax means just that, ie. taxable income.... not net income after tax.

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By johngroganjga
15th Nov 2014 13:33

You gross income for this
Your gross income for this purpose is clearly the profit shown in your accounts.

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By lazysunday
15th Nov 2014 21:50

Thanks for the replies.

OK, so as I thought, the gross income "before deduction for or relief from tax" is the total receipts minus the allowable expenditure but before tax is taken off or any reliefs are applied to tax that may be taken otherwise. 

However, is there an explanation of what the difference is between allowable expenditure an tax relief?

 

Thanks

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By johngroganjga
15th Nov 2014 22:12

No your gross income, as I said, is the profit shown in your accounts. That will be your sales less all your expenses, not just the ones that are allowable for tax

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