What are Operating Overheads

Overheads and expenses associated with running core business describe operating overheads. Non-operating overheads include interest charges.

Operating Overheads and Expenses

Essentially the direct costs of running a business, operating overheads are charged to gross profit in order to return the operating profit.

Wages and associated staff costs, selling, administration and depreciation describe the categories of operating overheads needed to allow a business to trade. Interest charges on the other hand are excluded.

All of the principal overhead groups' forecasts are calculated and applied to the profit and loss forecast by Figurewizard simply from the predicted values you enter, including those that are dependent on sales volume such as the cost of delivering orders and bad debt provision (including calculating VAT refunds) without further intervention from the user.

Tax Deductible Expenses

With few exceptions all operating overheads incurred "wholly and exclusively" for the purpose of business operations are tax deductible. The chief exceptions are entertainment expenses, fines and provisions.

Interest Charges

Although they are not included with operating overheads, interest charges are tax deductible. Their exclusion is because they are concerned solely with servicing external financing debt, which is not associated with trading.

Depreciation and Other Provisions

Although a legitimate overhead, depreciation is not tax deductible as it is a non-cash provision.

Capital allowances substitute for depreciation when it comes to calculating taxable profit. These can be more generous for small and medium sized businesses in the first year of ownership than the depreciation charged.

A provision for bad debts is not tax deductible either. Like depreciation, a provision for bad debts (or for anything else) does not involve an exchange of cash.

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