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I’m trying to figure out taxable profits answer. So profit less the allowance but I can’t figure out where is allowance comes from?
I understand it’s on tax allowable from on plant and machinery. Which has a scrap of £400,000. Straight line method with 25% tax. I thought the ppe is £3m-0.4scrap /4yrs * 25% but it’s wrong.
The allowance is 650 pa?
Thank you in advance.
The allowance is (3,000 – 400)/4 = $650 per year.
(This reduces the taxable profit which does result in a tax saving of 650 x 25% = $162.50 a year. The tax payable is $162.50 less than it would have been if there had not been any allowance.)