- This topic has 2 replies, 2 voices, and was last updated 5 years ago by
.
-
Posts
-
Sir, I understand the meaning of tax evasion. It is when company makes negative taxable profits then cannot utilize the tax benefits.
howver, why it is a benefit to a lessee as opposed to a purchaser?
because the answer said, lessee can avoid tax exhaustion.From my logic, when lessee has the asset , he can claim tax relief on lease payment. But, if he is a purchaser and if his investment makes a negative taxable profit, then he cannot claim the tax relief.
Is it true?
I don’t know where you read the statement and whether or not it was in an answer that was referring to some earlier calculations.
However if a company purchases an asset they get capital allowances which are higher in the earlier years and lower in the later years. That might result in a tax loss in the early years which would mean that they do not get the full benefit of the tax saving in the early years (although with loss relief they should get it in later years).
If, instead, they lease the asset then the lease payments are likely to be the same amount each year and so they are less likely to have tax losses.
- You must be logged in to reply to this topic.