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Hi
Why is the cost for div b entitled to tax relief at source for goods purchased either externally or internally. I don’t understand. I thought u could only be taxed on profit?
Please advise.
Thanks
Ed
You are taxed on profit, but that is a combination of being taxed on revenue less tax relief on costs.
We don’t have the revenue figures we need for Division B so can’t work out the tax for that division. However, the revenue figure will be the same irrespective of how Div B obtains its supplies. Therefore we look at the tax effects on the costs to decide which scheme is better: only cost differ so only tax relief on costs will differ.
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