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Taxation (factors that influence after-tax investment returns (total rate…
Taxation
factors that influence after-tax investment returns
total rate of tax on an investment
how tax is split between income and capital gains
timing of tax payments
whether tax is deducted at source or has to be paid subsequently
whether tax deducted at source can be reclaimed
whether gains and losses can be aggregated between different investments or over different time periods.
five further factors that influence after-tax investment returns
investor's financial position
overall tax system, e.g. tax rates, allowances and exemptions
particular rules for individual types of asset
tax-efficiency of the vehicle used to hold the assets
investor's own status as individual or particular type of institution
factors that may reduce amount of capital gains tax paid
indexation
capital gains tax allowances
if tax is only paid on realised gains
using derivatives to change exposure
factors that influence amount of income tax paid
income tax rate
income tax allowances
differences in taxation of earned and unearned income
types of corporation tax system
classical
company pays tax on profits
dividends paid out of post-tax profits
investor taxed on dividends
split-rate
similar to classical except...
different rates levied on distributed and retained profits
imputation
company deducts some of the tax payable by investors on distributions and pays it directly to government
this amount is set odd against subsequent total corporation tax bill of company,
gross investor may be able to reclaim tax paid
tax deducted by company "imputed" to shareholder
basic rate taxpayer pays no further tax
higher rate taxpayer pays additional tax, up to higher rate.
how corporation tax affects company's financial operations
dividends payable
gearing