What must be added back when calculating interest payments in allowable payments?

When calculating interest payments in allowable payments, it is important to consider the specific regulations that govern how these payments are classified. The correct answer is that the excess over £500 must be added back.

This is because tax regulations often impose limits on the amount of interest expense that can be deducted for tax purposes. In this context, any interest payments exceeding £500 are not considered allowable expenses for the sake of tax deductions. Consequently, this excess amount must be added back to the taxable income calculation, effectively reducing the interest expense that can be claimed against income for tax liability calculations.

The other options do not pertain directly to the calculation of interest payments as allowable payments. For instance, depreciation on machinery relates to capital assets and does not fall under interest payments. Capital gains are profits from the sale of assets and are treated differently under tax laws. Lastly, business expenses incurred can generally be deducted but do not specifically relate to the calculation of interest payments in the same way that the excess over a defined threshold does. Therefore, adding back the excess over £500 is a specific requirement under tax law that ensures compliance with stipulations regarding deductible interest expenses.