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if the tax is payable one year in arrears, how about the tax benefit of capital allowances?
for let said, the In year one, the profit is 200, tax is rate is 30%, the capital allowances is 50.
when can we enjoy the tax benefit of capital allowances? in year 1 or year 2?Because i am confusing with the timiig to claim the tax benefit of capital allowances.
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I am getting the treatment of capital allowance really mixed up. For a scenario with a tax rate of 25% and straight line depreciation period of 4 years for NPV computation, i have seen tax allowed depreciation taken 20% of the cost of the depreciable asset while in some other instances, it has been taken as 25% of 25% of the depreciable asset. i will like a clarification of the correct what to treat it
cyh: the tax benefit from capital allowances follows the same rules as does the tax on the profit. If there is a one year delay in tax, then there is a one year delay on the tax saving from the capital allowances.
ayopeloye: It depends whether the depreciation is straight line or reducing balance, and that is a Paper F3 problem.
Have you actually watched my free lectures (especially the Paper F9 lectures on investment appraisal with tax, because this is revision of Paper F9) ? I cannot type out all of my lectures here 🙂
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