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Im probably showing my complete ignorance as far as tax is concerned (I have not completed or studied F6 yet!) but could you help me?
Tax exhaustion takes place when there is no profit made. Say you bought a machine for investment and unfortunatley made no profit for 2 years. Would you still get the capital allowance of the asset depreciating for those two years or would this only take place once you began to be profitable (and hence actually being taxed in the first place?). Say in year 3 you were profitable but capital allowance was larger than your tax liability, would you receive money from HMRC?
If completing investment analysis, is this something to be aware of i.e don’t include capital allowance calcs if not profitable?
Does this possibly have an influence on the lease buy senario. i.e if you were unprofitable for any period you would fail to get capital allowances? Would this be a significant advantage for a new buisness with uncertain profit for the near future?Sorry if this is a stupid question and makes little sense. If so please put me right!
Thanks for your help.
If you made no profit, then you still get capital allowances, but it creates a loss (and then you get loss relief against future profits).
However none of that is relevant for F9 🙂
We always assume that the business is making sufficient profits to get the full benefit of capital allowances. (It is not just the profit from the particular machine – even if the machine gave no return in one year we still assume that the business is making sufficient profits elsewhere to get the full benefit of allowances.)
There is never any question of having to deal with loss relief in F9 🙂
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