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Hello ?
There is a sentence that the difference between the proceeds and the tax written down value in the year of disposal is allowable or chargeable for tax as appropriate in the Q..I reviewed the answer for couple of hours..Unfortunately still didn’t understand how tax allowable depreciations were calculated in 20X5 and in 20X6..Please tutor, can you read Q and explain the calculation…It is the normal way of calculating capital allowances in all questions involving tax.
There is an allowance of 25% reducing balance each year until the year in which it is sold.
In the final year we subtract the sales proceeds from the written down value and the difference is a balancing charge or balancing allowance.For a full explanation of how it works you need to watch my free lectures on investment appraisal with tax (and also the lectures on lease and buy). (My free lectures are a complete course for Paper F9 and cover everything needed to be able to pass the exam well)
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