Taxation PDF

Taxation -certain finance options are tax deductible for businesses and households whilst others are not -tax deductible options reduce the cost of borrowing for a business through reducing its end of year tax liability -interest on loans are tax deductible for businesses -mortgage interest is...

Taxation -certain finance options are tax deductible for businesses and households whilst others are not -tax deductible options reduce the cost of borrowing for a business through reducing its end of year tax liability -interest on loans are tax deductible for businesses -mortgage interest is tax deductible for businesses -cost of leasing payments are tax deductible for a business -interest on hire purchase repayments are tax deductible for businesses -dividend payouts are not tax deductible for a business (may disincline a business from using ordinary share capital as a finance source) Control -business must consider whether the source of finance will dilute company control of the business -issuing ordinary shares will dilute company control whilst a loan does not Risk -a business which has less chance of making a profit is deemed more risky than one that does 9 -potential sources of finance (especially external sources) take risk into account and may not lend money to higher risk businesses, unless there is some guarantee that their money will be returned -newly established businesses are seen as high risk -strong security collateral may be required as a result of higher risks