finance lec 5 - Taxation

Question 1

we cant give proper Investment Apprasiasl reccomendaions without taking what into account

Answer 1

tax implicationa

Question 2

what is tax charged on

Answer 2

profits made

Question 3

in terms of income and expenses what is taxable and what is deductable

Answer 3

income - taxable

expenses - tax deductible

Question 4

why do gov give tax allowancce

Answer 4

to incentivise bs to invest in assets

Question 5

in terms of investing in assets you are allowed to write off waht

Answer 5

part of the cost of investment - allowd to treat it as an expense

Question 6

when you write of cost of investment of an asset it is only for teh purpose for ….. not

Answer 6

calculating tax

doesnt change the final figure of profit for your SH

Question 7

contiuing on cost of I being weitteen off why cant investment in assrt be treared as an expense in the IS

Answer 7

Cause it is an asset not an expense s dont sit in the income statement

onyl treat it as an expennse for tax purposes only

Question 7

if we have more taxable expenses what will taxable profit be

Answer 7

smaller

Question 7

how do we calculate the tax liability

Answer 7

taxable profit * tax rate

Question 8

capital allowance is defined as

Answer 8

tax reloef given on investment in tangible non current assets

e.g land building equpment , machinery

Question 9

what is our reducing balance aka tax rate

Answer 9

25%

Question 10

some assetsattract greater

Answer 10

first year allowwances

e.g 40,50,100%

Question 11

who does 40% tax allowance fo to

Answer 11

medium sized company

Question 12

who does 50% tax allowance go to

Answer 12

small company

Question 13

who does 100% tax allowance go to

Answer 13

really innovative environemtnyl friednly prokect

Question 14

after 1 year what do the special tax allownace go back to

Answer 14

25%

Question 15

if i get a tax llowance of 100% why is this so amaxinf

Answer 15

got no value in next year balance so never charged on it really

Question 16

tax losses and credit canbe

Answer 16

carried forward

Question 17

you may get a balancing charge /disposal if

Answer 17

disposal proceeds are more/less than the tax write down value

Question 18

at end of project you can sell asset it may hahve a scarap value of

Answer 18

0

or £ x amount

Question 19

lets say project cost you 100k - at the end of a 5year proect now valued at 30k - so we write off 70k

now we gonna sell it for 50k

gov said only used 50 k cal of aset

what does the gov require you do

Answer 19

gov said you’ve only used 50k of value of asset so pay tax on the additional 20k you sold for

Question 20

lets say project cost you 100k - at the end of a 5year proect now valued at 30k - so we write off 70k

now we gonna sell it for 15k as this is the hihgest we can go

gov says you used up 85k of asset value

but CA can only let you write off 70k

what does the gov do

Answer 20

Give you a balancing allowance in final year to make up for the 15k extra value loss

Question 21

how do we work out big tax questions

Answer 21

1. w/o capital allowance

reduce pretax cashflow by capital allowance to get adjusted taxable profit

calcaulte he tax rate on the taxable cashflow/profit and pay it

subtract taxable from pretax

w/o all the cashflows - dont forget the disposal value add on

w/o npv

Question 22

of the opening value for the (last period) is bigger than the disposal value what will happen

Answer 22

will geet a balancing allowannce and vise versa

Question 23

how can you work out the balancing charge/allowance

Answer 23

total use of asset

_

total writing down allowance

Question 24

how do we work out total use of asset

Answer 24

differnce between

what you started off with

and disposal value

Question 25

how do we work out the total writing down value /capital allowance

Answer 25

add all the capital allowance till expcept for the last yea

Question 26

capital allowance aka

Answer 26

writig down value