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This is a doubt from Q32 page 28, answer 32 page 139 of the BPP revision kit.
For calculating the Discounting factor of the Tax on Payments why have they taken the Years 1-5 factors – the year 1 factor, and not years 1-4 factor – year 1 factor?
Is this because tax is payable one year in arrears. My doubt is why are we using the fifth year when the lease lasts only for 4 years ?the discount factor is suppose to be from year2-year5,so check if they subtracted the df of year1 from the 5year annuity factor to arrive at that figure
ok,tax is payable one in arreas,so tax will not be paid in first year and you cant discount the amount which is not there, tax for year one will be paid in the following year and therefore discounted in year2,so year2 tax will be paid in 3rd year and discount and so on..thats why it has reached the 5th year. I would have answered those other questions its just that am using a 2010 revkit
ok,tax is payable one in arreas,so tax will not be paid in first year and you cant discount the amount which is not there, tax for year one will be paid in the following year and therefore discounted in year2,so year2 tax will be paid in 3rd year and discount and so on..thats why it has reached the 5th year. I would have answered those other questions its just that am using a 2010 revkit
ok,tax is payable one in arreas,so tax will not be paid in first year and you cant discount the amount which is not there, tax for year one will be paid in the following year and therefore discounted in year2,so year2 tax will be paid in 3rd year and discount and so on..thats why it has reached the 5th year. I would have answered those other questions its just that am using a 2010 revkit
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