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I saw you lecture on losses ch18. Wonderful effort! On the last moments you gave us idea on tax saving evaluations. I thought when like on the past years we have paid the CAP tax. Now the loss raises repayment of tax.
On analysing this, why we say it is tax savings?
I can make it little helpful for u to understand:
Y/E march 214 and 15.
2014 TTP = 490,000 without the loss relieved = marginal company
2015 TTP = 90,000 without the loss relieved = small companyLoss = (350,000)
2014 TTP = 140,000 with the loss relieved = small company
2015 TTP = ( – ) with the loss relieved = ( – )Tax savings:
90000 * 20% = 18000So why we call it tax saved?
I am ok with the learning of calculation part though!
Many Thanks
It is a tax saving because without the use of the loss the tax would have remained paid for the previous period and payable for the current period. The loss relief reduces those amounts of tax due, therefore saving the company from incurring those tax costs – getting a repayment of tax already paid for the previous period and avoiding having to make payments for the current period.
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