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Sir, I still have some confusion regards to previous post.
As you mentioned:
1 – No. Tax base is the value of an asset that is still to be allowable as a deductible when calculating tax payable – it’s the cost of an asset less the capital allowances already given.cost of an asset less capital allowances is not considered as residual expenditure?? because I thought cost of an asset is equivalent to qualifying expenditure (based on taxlaw), unless there is restriction on qualifying expenditure amount so the cost may only different with qualifying expenditure
2- Now, apply this to your second question – if carrying value is lower than tax written-down value, the taxman is due to let us have an amount as tax-deductible greater than our depreciation charge so that means we have a deferred tax asset
I still don’t understand this sentences. Why when tax-deductible greater than depreciation charge will be asset? Can explain it further?
3 – Based on taxable profit – and that itself is based on accounting profit as adjusted for add-backs like depreciation and deductions like capital allowances
Taxable profit is equivalent to statutory income OR adjusted income (based on tax comp)?
If it is based on statutory income, Is that means it is based on taxable profit which is use accounting profit add back non allowable expense less capital gain less double deduction =adjusted income + balancing charge- capital allowance = statutory income. Then, the tax expense will be calculated based on tax rate X statutory income?
Thanks Sir
1 – assets are (generally) allowable as tax deductible over a period of time. But because different entities have different depreciation policies, the Government has said “Forget depreciation as a measure of tax deductibility. We’re going to give you a standard rate of deductibility (typically 25% reducing balance)”
So that inevitably gives rise to differences – sometime TWDV exceeds NBV and sometimes NBV exceeds TWDV
2 – “Why when tax-deductible greater than depreciation charge will be asset? Can explain it further?”
If TWDV exceeds NBV, it means that the taxman is going to allow us an amount (TWDV) as deductible against future profits whereas our own accounting suggests that the asset has only NBV as an allowable amount
3 – Taxable profit is accounting profit as adjusted for tax rules – accountants work on an accruals basis whereas taxman tends to work on a cash basis
“is use accounting profit add back non allowable expense less capital gain less double deduction =adjusted income + balancing charge- capital allowance = statutory income”
Probably, Yes
OK?
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