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“Tax liabilities settled at the end of the year in which it arises”
does the above statement mean that tax is paid one year in arrears? Or the same year ?
The same year (but at the end of each year).
This is all explained in detail in my free lectures on investment appraisal with tax (because remember that for discounting we are not looking at full years but at points in time that are one year apart).
Kaplan Exam Kit investment appraisal Section B type questions
Deacon co“Pays corporation tax at 20% one year in arrears” and again it says
“All lease payments are allowable against tax in the year of payment”Does tax need to be dealt with differently for each case in here?
I do not have the Kaplan kit – only the BPP Revision Kit.
However. if the lease payments are paid in advance then the first lease payment will be at time 0. If the lease payments are paid in arrears then the first lease payment will be at time 1.
In either case the first tax saving will be one year after the end of the accounting period and will therefore be at time 2.
This is applying the normal rule in both cases.
Again, have you watched my free lectures on ‘investment appraisal with tax’ and on ‘lease v buy’?
The lectures are a complete free course for Paper FM and cover everything needed to be able to pass the exam well.
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