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November 24, 2023 at 5:39 am
Hi Sir, please i need a little clarification. In calculating the tax savings, why isn’t the corporation tax percentage calculated on the 7,500 but on the capital allowance in order to get the savings?
John Moffat says
November 24, 2023 at 7:44 am
Because it is only the capital allowances (the tax allowable depreciation) that reduces the taxable profit each year and therefore saves tax. This is a tax rule from Paper TX.
May 29, 2023 at 10:13 pm
I have a doubt. In calculating the 3rd years balancing charge, since we selling the machine at end of the year don’t we need to calculate the NBV of machine at the end of the year. and if so, the balancing charge would go up. Am i right?
May 30, 2023 at 8:50 am
They rule I work through in the lecture is the correct tax rule in that there is no writing down alliance in the last year, just the balancing charge or allowance. If you do put a writing down allowance in the final year, the balancing charge or allowance will change but the net affect will end up being exactly the same so it doesn’t really matter in the exam.
May 10, 2023 at 9:56 am
Hello John, Thanks for these beneficial lectures. While solving using the BPP practice and revision kit to prepare evaluations / calculate NPV, I noticed that when we are dealing with depreciation, they are not including the depreciation expense in the calculations (as this is important to calculate correct income tax). If they say it is included in variable/fixed costs, then it(depreciation expense) should be added back to the net cash flow as this is a non-cash item. I am really confused, am I missing anything here? Ref.: Example No. 163 Uftin Co (December 2014, amended; page 60). Thanks in advance.
May 10, 2023 at 4:21 pm
Please ask this question in the Ask the Tutor Forum and not as a comment on a lecture.
March 27, 2023 at 8:19 pm
Hi John, I am trying to watch the lecture but it is saying is not available. Can you please advice how I can watch it? Thanks
March 28, 2023 at 6:58 am
The lecture is working fine. If you are still having problems then please ask in the ‘technical problems’ forum and admin will try and help you.https://opentuition.com/forum/technical-problems/
March 28, 2023 at 7:45 am
it has been fixed
November 16, 2022 at 9:43 pm
Thank you very much for the lectures John – very clear explanations
November 17, 2022 at 8:26 am
Thank you for your comment 🙂
November 9, 2022 at 4:02 pm
Wasn’t the net cash flow in year 3 supposed to be 13,463? 8,000-2100+563+6000+1000
July 9, 2023 at 3:34 pm
i got the same!
July 9, 2023 at 5:21 pm
Yes – my mistake (but the printed answer in the notes is correct 🙂 )
August 13, 2022 at 5:51 pm
Hi, why do we have to do 30% of the capital allowance, is the whole of the capital allowance not allowed?
August 14, 2022 at 11:27 am
The whole amount is allowed, but with tax at 30% the tax saving is 30%.
August 4, 2022 at 9:51 pm
Thank you Sir for great lecture, I was reading it in Study Text but I got impression it’s difficult to remember. Now, after watching the lecture all makes sense. Thanks to your lectures I have already scored 82 in PM, now I hope to pass FM 🙂
August 4, 2022 at 9:54 pm
Thank you for your comment, and congratulations on passing Paper PM with such a good mark 🙂
May 23, 2022 at 4:07 pm
Hi Sir, when do we use the post tax cost of borrowing instead of pre tax?
May 23, 2022 at 8:04 pm
We always use the post-tax cost of borrowing when calculating the WACC for the purpose of appraising projects.
(The pre-tax cost is really the rate of return demanded by investors and that is relevant when calculating the market value of debt borrowing.)
May 3, 2022 at 10:55 am
Hi Sir, if so happens there is no scrap value, will there be a balancing charge/allowance? Or do we just count the final year as tax allowable depreciation?
May 4, 2022 at 8:19 am
The rule does not change, which means that there will be a balancing allowance in the final year of the amount of the tax written down value.
April 28, 2022 at 7:13 am
Hi Sir, wouldn’t it make more sense to take cash flow minus depreciation and get the taxable profit then charge tax on that?
April 28, 2022 at 8:50 am
By all means do that if you want, but it then means either showing the tax calculation as separate workings or remembering to add back the depreciation after calculating the tax because the depreciation is not a cash flow.
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