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Hello Sir,
I have a quick question in relation to the taxed saved on capital expenditure in example 3. While I understand the timing it is the total tax saved that is confusing me. The total tax saved in this example is 37000 (7500+5625+4219+13164+6492), however if we buy for 100,000 and sell for 10,000 with corporation tax of 30% shouldnt the maximum tax we could save be 30,000?
thanking you,
JohnNo. The total tax saving will be (100,000 – 10,000) x 30% = 27,000.
That is the correct total – it is not 37,000, you have included the 10,000 scrap proceeds which is not a tax saving.Have you watched my free lectures working through this example? You should not be using the notes on their own because they are only lecture notes, and it is in the free lectures that I explain and expand on the notes. (If you are not watching the lectures for any reason then you need to buy a Study Text from one of the ACCA approved publishers and study from there).
Also, have you watched the earlier lectures on Investment appraisal with tax, because it is in those lectures that I explain the rules about capital allowances (tax allowable depreciation).
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Apologies, it appears I have made two very simple mistakes in my own notes and did not notice them,,very embarrassing..Im currently going through your lectures and finding them very beneficial, thanking you and apologies again
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