ACCA AFM - VAT Treatment in NPV/APV

Former user1y ago

Hi John Can you clarify the VAT treatment when calculating an NPV or APV. If the Taxable profit amount in year 1 is negative and the question says that the tax can be offset against other projects, do you exclude the VAT for that year or do you include it in the table as a positive number? Many thanks

John MoffatTutor1y ago#1

I don't think that you mean VAT (because VAT is not examined in Paper AFM :-) ). I think you are referring to that tax on profits. If the question states that tax losses are offset against other projects, then if the project gives a 'loss' in one year this will result in the company paying less tax overall then they otherwise would be doing and so as far as the project is concerned it is a tax saving (i.e. a positive number). Have you watched my free lectures on this?

Former user1y ago#2

Hi John, yes sorry didn’t mean VAT but TAX on profit! Thank you for the explanation. It makes sense. I will revisit your lectures..

John MoffatTutor1y ago#3

You are welcome :-)

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