Hi I have a question with respect to the BLAGAB Tax Computation Appendix Example on page 18 of Chapter 7 - Taxation (2) for the 2023 exam syllabus. There seems to be some circular reference in the computation of the [Policyholder share of taxable profits] which got me confused. All is well at the Total I-E taxable profits = 80. -The [Shareholder share of taxable profits] is dependent on Calculation 2, which is derived from the [BLAGAB trade profit] component. -The [BLAGAB trade profit] component is derived from Calculation 1, and part of Calculation 1's computation is derived from deducting [Policyholder current tax deduction] component of (10) -This [Policyholder current tax deduction] component appears to be derived by taking 20% of 48 (and rounded up from 9.6 to 10?) -But this 48 is derived from [Total I-E taxable profits = 80] less the [Shareholder share of taxable profits = 32]. -This is where the circular reference seems to arise - How can we derive [Policyholder share of taxable profits] if [Shareholder share of taxable profits] is dependent on its value? Am I missing something here?
Yes, there is indeed a circular reference in the calculation as set out in that Appendix. In practice an approximation would be used to resolve this, but you wouldn't be expected to know such detail.
