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Another question on Example 3 in chapter 9 – in the leasing calculations where does the £10,500 tax saving per year come from? I can’t seem to make sense of the answer at the back – any ideas would be welcome!
Thanks
That would be 35,000 * 30% = 10,500. Net profit drops due to the lease payment, so you pay less tax on that.
However, I do have another question. Why the tax saving on CA’S in this question starts year 1 rather than year 2? And why it is 5 years not 4 years, i thought it should be same as project life.
I guess it starts in year 1 because machine was bought on the last day of current financial year.So CA will be next year e.g.year 1. If machine would be bought in the beginning of the year 1 then tax savings would incur in year 2.
Hope im right
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