Energy costs

[The Natural Philosopher]

Gross profit and net profit mate.

And often you get taxed before the investment - not all investment is tax deductible.

Thres an interstiung point to make here.

Let say I am a company, and I make 11 billion quid (EX VAT) on selling something thiing cost me 10 billion. I now have a billion gross profit.

The government will take 25% of that, that is 250million, in corporation tax.

With 5% VAT levied on the sale of that product, they have also taken 550 million as well.

Total government take is therefore 800 million. After tax, net profit for me is 750 million.

Who is taking more and providing less - the government or me?

Who are the thieving scum that are gouging my pay packets?

Nothing helps the fundamental equation that any protection racket that extorts more money than its 'clients' can afford, will collapse in on itself.

In the end givernment money is your money, given back to you for 'protection' after the godfathers have taken their extremely large cut.

[Tim Streater]

ITYM "If we can't make a profit we won't invest", which is not the same thing. And neither would you. Or do you have a habit of putting your spare £1000 intro Makealoss Corp, which guarantees that your grand will be worth £950 after a year. I think we should be told.

I haven't a clue what you are talking about.

[Jethro_uk]

Except that's a meaningless example, since you haven't defined "cost". In my book, "cost" includes things like:

Money paid to enlarge premises; Money paid to renew infrastructure; Money paid to train staff; Money paid to research and develop new products, ways of working;

etc

So this £1 billion comes *after* all of that.

To me "net profit" is what is left after the government have taken their cut of "gross profit". But the underlying "profit" is what is left after costs. Which *include* investment.

[Jethro_uk]

Not what *I* mean. It's what they *say*.

Profit is counted *after* investment. So a company reporting £1 million profit is saying "here's how much we made after spending on everything". Or in other words "we could have spent £500,000 more on investing in the business and only had £500,000 profit, so look what we chose". Which (addressing your point about Makealoss) is fine. But notice how "investment" was reduced for "profit".

[The Natural Philosopher]

No it doesnt.

enlarging premises, renewing infrastructure and even R & D may represent non deductible capital assest investments.

This is why many companies prefer to lease than to own: they can offset all lease costs imnmediately against profits. But if you won someything its on the asset register, not the P&L. Money going into assets is NOT a cost.

And indeed some R&D that reuslts in demsonstrable intellectual property may be 'capitalised' by the accountants as well.

Well you are in fact wrong.

IN fact the government actually had to change the law - there was a bigf fuss about it - to encourage investment by the water companies because they wanted to get the networks sorted.

Now there is a howl that thay 'aren't paying taxes' because they are investing in a tax free enhancement of their infrastructure. The fact that the government made that a specific law shows that investment is post, not pre tax, normally.

>

[The Natural Philosopher]

Complete bollocks.

There are complicated rules on what constitutes an asset in a company, and what is a cost, but expenditure on assets is not tax deductible and its paid for OUT OF PROFITS, AFTER TAX or by debt financing.

Assets are two edged sqpordss, Omn one hand having assets in te asset register makes you look like ytou have 'book value' to acquire access todebt' On the other hand assets represent money you got taxed on and turned into an asset.

Not so good.

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[Tim Streater]

You obviously live in your own little world rather than the real one.

[The Natural Philosopher]

Its quite frigthening how little these anti-capitalists actually understand about corporations, the law, accounting procedures and indeed any aspect of running a business.

Up to and includiong Miliband himself. See my sig.

[dennis]

So who is going to invest capital in a company that can't pay it back with a profit? In fact they may not be able to pay it back at all.

They have to pay for energy at market prices and then resell it at a fixed price 20 months down the road.. if cost price goes up they make a loss on everything they sell so why sell it at all, just pull the plug.

They would either have to buy the energy 20 months in advance which adds costs or take the risk and pull the plug if its costing too much, neither is going to be good for the consumer.

[Roger Chapman]

Capital expenditure is indeed excluded from the calculation of taxable profits but all is not lost. Capital allowances can be claimed on some of it. I suggest you bone up on Capital Allowances and, in particular, First Year Allowances.

[Peter Crosland]

That is complete rubbish!

You clearly haven't got the first idea about how business functions. Businesses often reinvest their profits and without profit that will not happen. Of course businesses can borrow money but that will only happen if investors see a reasonable opportunity that future profits will be made. That borrowing often takes the form of issuing shares that purchaser hope will appreciate in value as well as pay dividends. Making profit is essential to rewarding investors.

[alan]

The deal is self financing

The 10%+ of your electricity/gas bill that is subsidising windmills, "giving away" insulation and low energy light bulbs will be stopped for

2 years.

Those with solar panels will only get paid for the actual power that they put back into the grid and at the same price per unit that is charged for power flowing from the grid to the household.

The 10%+ saving will be used a buffer fund against raw material price rises during the 20 months of the price cap.

[Adrian]

It's kinda both - investment before _and_ investment after profit.

Think about it.

A company buys . That cost can most certainly be counted as expenditure within the year. It's an investment in the business.

OR

A company declares a profit. Half of that profit is distributed to investors, the rest is retained as an investment in the business.

[John Rumm]

Sure, why not - its your pension you are screwing.

[John Rumm]

That's not true really... If I buy equipment for my company, it comes out of our gross income and reduces our taxable profits for that year. Its then counted as an asset and added to the companies asset register, and a cost is allocated against the business each year to allow for its depreciation.

[The Other Mike]

No shortages of bog paper now though

[The Natural Philosopher]

wrong.

[The Natural Philosopher]

in which case you should not say that on a newsgroup because you are evading tax. It does NOT rediuce taxable profits because

..by dint of that capital gains have been made

yes. so you cant write the cost off completely against taxt in year one AND then over the next ten years.

>

[Adrian]

A capital gain is made at disposal, not acquisition.

[Adrian]

Just, please, don't even _contemplate_ going into accountancy.