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Hi Sir,
I come across this on question 97 (page 36) in the BPP Exercise Booklet (for Tax year 2016/17).
In the question, Ronald receives a premium of 12,000 for a grant of 30-year lease. When calculating this income, the answer shows 12,000 * 2% * (30-1).
May I ask the logic for the calculation? What is 2%? Why the year should be less 1?
Thanks.
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Sorry, sir, I forgot to point out that it is for F6 exam. Thanks.
Have you read the OT notes and listened to the lecture on this subject? The reason why it is 2% per year is that if the lease is for one year the premium is 100% income, whereas if the lease is for 51 years the premium is 100% capital and therefore no income assessment arises. It therefore moves by 2% pa over the 50 years difference
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Hi Sir,
Thank you.
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