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Hi. John
I have question. You told me that balancing charges should always be considered when calculate NPV. SO I want to know if the balancing of the capital allowance is zero. Could I calculate the balancing charges? Thanks.
Another one is I inJUNE 08 paper, for the question 5. It said that claim first year capital allowance and tax is delayed. If I follow your solutions, 120 Should be put in the year2 not the year 1. But the answer is in year1add the tax saving 120. How come? Thanks for your patience to answering questions.The balancing charge or allowance is the difference between the tax written down value and the sale proceeds (it is a Paper F6 rule, but is also applied in Paper F9 investment appraisal).
Just be careful of one thing – occasionally (not very often) the examiner gives the sale proceeds and says that it is net of tax. In that case there is no balancing charge or allowance because it is assumed to have already been taken into account.
With regard to the June 2008 question – yes indeed. The tax would have been better put in year 2. It was the previous examiner – the current examiner is more careful.
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