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Hi
May you please help me with the concept of Capital Allowances. Why are they tax deductible? And the tax savings as per DCF.
Thanks pritpal
Capital allowances is tax allowable depreciation. When calculating tax, the tax authorities ignore the depreciation actually charged in the accounts, and instead calculate the taxable profit using their standard rules for tax allowable depreciation.
You are best watching the Paper F9 free lectures on Relevant cash flows for investment appraisal. I explain what capital allowances are, and how we deal with them in NPV questions – with examples. This is revision of Paper F9.
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