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Hello Sir,
I was going through March/June ’18 question involving Tippletine and was wondering about the “tax relief lost” used in calculating the financing side effects. Is this only factored in as there is a choice of financing options? I ask as more recent APV questions (specimen exam and Dec ’18) did not calculate any tax relief lost however both of these questions were only part funded by subsidised loans.
Thanking you for your assistance,
John
The examiner has been a bit inconsistent in the past and has set it out in different ways.
However the logic is that had they now had the subsidy then they would have had a tax benefit on interest if 5%. Getting the subsidy does obviously give them the benefit of paying less interest, but at the same time loses part of the tax relief that they would otherwise have been getting.
So the net benefit of the subsidy is the interest benefit less the tax relief that they are no longer getting.
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Thanking you, that clears it up for me
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