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Just very confused about the strat time of “Tax Saving on CA’S” . Normally it starts at Year 2, but sometimes it starts at year 1. I can not tell the difference.
And I thought the length of “tax saving” should be same as the length of the project, but in some questions it is longer. Any idea would help me. Thanks.
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In all questions I’ve seen if:
1) Tax is payable 1 year in arrears – then both tax on trading profits paid and tax for capital allowances received will happen in Yr2.
In this case last tax instalment (paid and received) will be 1 year later than last trading cashflows.2) Tax is payable in the year in which profits arise (if it doesn’t say anything about timing assume this method) – then both tax on trading profits paid and tax for capital allowances received will happen in Yr1.
In this case last tax instalment (paid and received) will be in last year of trading profits.I just practice the Practice Question 9 Ballet(course notes). In this question, the tax for capital allowances received in Yr 1 even it said the tax paid with one year delay.
hi i’m student at F9 paper and i really confused about calculating CAs we used three methods during the course ,could you tell me which one i should use ? thank you
machine has a cost 40 000 and it has 4 year life and residual value 5000 . 25 % dep allow and the tax is 20 %
method 1
year 1 40 000 * .25 = 10000 *.20 = 2000
years 2 *.75= 7500 *.20 = 1500
year 3 *075=5625 *.20 = 1125
year 4 40000 – ( 10000+7500+5625+5000)
= 11875 *.20 = 2375method 2
year 1 40000* .25 = 10 000 *.20 = 2000
year 2 8000 *.20 = 1600
year 3 6400 *.20 = 1280
year 4 40000 – ( 10 000+8000+6400+5000)
= 10600 *.20 = 2120method 3
CAs = 40000* .25 = 10 000 *.20 = 2000 for the first three years
and year 4 = 40 000 – ( 10000*3= 30000 + 5000)
= 5000 *.20 = 1000kind regards
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