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Dear Mr Moffat…unable to understand why TAD ( 25% reducing method with balancing allowance)not being considered before PBT and then again added back after TAX … In the examiner’s answer TAD has been deducted from Operating Margin and then Tax being calculated on the net amount.
Tax is always calculated on the taxable profits, which are the operating cash flows less the capital allowances (TAD).
There is nothing to add back because the tax workings have been shown separately and the TAD had not been subtracted in arriving at the net cash flows in the first workings.
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