Taxation and Ethical Principles of Ford Motor Plc

The assignment delves into taxation laws and regulations in the context of Hungarian and United Kingdom businesses. It highlights the taxation implications for both incorporated and unincorporated associations. The moral and ethical principles relevant to Ford Motor Plc are also discussed, providing a comprehensive understanding of taxation practices in these jurisdictions.

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
Analysis of taxation systems and taxation legislation implications............................................1
Critical analysis and comparison of taxation systems of different countries..............................2
Recommendation for developing effective taxation systems and legislation to meet global
principles.....................................................................................................................................3
TASK 2............................................................................................................................................3
Implication of taxation liabilities for unincorporated organizations...........................................3
Calculations of the taxation liabilities for unincorporated organizations...................................4
Interpretation and analysis of the data........................................................................................5
TASK 3............................................................................................................................................5
Explaining the taxable liability for both public and private organizations.................................5
Determining the taxation liability of incorporated organizations...............................................6
Interpretation of data and determination of taxation liabilities, for incorporated organizations.
.....................................................................................................................................................7
TASK 4............................................................................................................................................8
Evaluation of the impact of key legislation and ethical constraint on different organizations
regarding taxation responsibility.................................................................................................8
CONCLUSION .............................................................................................................................10

INTRODUCTION
Taxation is a term which can be defined as a mode through which government make
exaction for revenues to run and operate the country. The tax is levied on the sales, income of
individuals, import, export, manufacturing and others. Its relevance is that it generate revenues
for government. The taxation levied different nations in accordance to their taxation rule and
for the given case of Ford Plc taxation liability and applicability is determined for three different
nation, UK, US and Hungary.
Ford Motor Plc is a United Kingdom based resident company with having its operation in
United States and Hungary and pay taxes on incomes earned as per respective countries' taxation
rules. The UK branch is profitable and pay tax @ 20%. US branch is going under loss and pay
tax @ 21%, while Hungary branch is also making profits with paying tax @ 9%. For the profits
earned from all three branches taxes are paid as per the taxation rues of respective nation. Each
branch works under the local jurisdiction. In the present report the taxation laws applicable to
different nations are identified and legislation governs the activities of Ford. The liability of tax
for unincorporated organization and individuals is also presented with use of appropriate models
and formulas. Along with this taxation liability of Ford and another car manufacturing company
Morgan Motor within UK is determined. The ethical and legal constrain associated with taxation
responsibility and their impact on the organization.
TASK 1
Analysis of taxation systems and taxation legislation implications
United Kingdom:
The taxation system in the United Kingdom consist of various taxes and legislation
related to them. The different form of tax included in the taxation system of UK are Values
added tax, income tax, national insurance, corporation tax, capital gains tax, motioning taxes,
inheritances tax, stamp duty, insurance Premium tax, air passenger duty and PAYE. The
corporation tax defines the tax implications of the profits earned by the incorporated organisation
under the national company law. The profits earned by the UK branch of the Ford Motor Plc is
taxable under the provisions of Corporation Act, 2009. The profits are taxed at a flat rate of 20%.
United States:
In the United States the taxes are levied by federal, state and local government. The
taxation system includes taxes on income, payrolls, property, sales, capital gains, dividends,
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imports, estate and gifts (Picciotto, 2015). The corporations are subjected to federal graduated
rate of 21%. The levy of the taxes on the profits of the Ford Motors Plc. in the United States are
governed by the Corporation Tax cut of and Jobs Act 2017. This act cut down the rate of
corporation tax from 35% to flat 21%. Ford being operating at national and international level
and having a branch in the US is eligibility to be taxed by the federal government of the Unites
Kingdom.
Hungary:
In the Hungary the taxed are applicable on the incomes earned directly or indirectly by
the individuals as well by the organisations. This includes corporation act, branch tax, minimum,
capital gains, income tax, VAT, real estate tax. In the Hungary the taxes are levied by local and
national government. The Act LXXXI of 1996 over the corporation tax and Dividend tax is
responsible to levy taxes on the profits earned by organisations operating and earning in the
Hungary. For 2018 the corporation tax rate was fixed at flat 9% for all the business in Hungary.
The Ford Motor Plc earning profits in Hungary is taxed under this act.
Critical analysis and comparison of taxation systems of different countries
To start the critical evaluation taxation system of three different nations it can be stated
that United Kingdom and Hungary are part of European Union, but the United States is not a
member-nation of EU. Each of the three nations have a different act which levies the taxes on the
profits and earning by the organisation operating in their respective countries.
In the UK tax payment of tax is levies and collected at three levels of government which
includes central government (HMRC), development and local government (Snape, 2015). In the
Us corporation tax is also operates at three level including federal, state and local government.
Whereas in Hungary the taxes of the corporation profits are applied by national and local
government only.
Th rate of corporation tax are also different for all three nations, but the corporation tax rate of
UK and US have a difference of just 1% that is UK- 20% and US 21%. On the other hand, the
profits are levied with a rate of Just 9% in Hungary which is lowest among all the member
nations on European nations.
All of three nations have tax law as VAT, corporation, capital and income tax though
with different rate and provision but levy taxes on the sales and incomes. But the wealth tax is
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only applicable in Hungary and national insurance is only the part of United Kingdom taxation
system whereas in the US there is no such different tax is present distinct from these two nations.
Moreover, the corporation tax rates in the Hungary have fixed to 9% in 2018 and in the US it
was changed to 21% in 2017 and was applicable from January 2018 from 35%.
With this it can be stated that the taxation system of all three nations that is United
Kingdom, the United Nation and Hungary have certain similarities in the form of tax rates and
few legislations. But all three of them have disparities also regarding the structure of taxation
system and levels through which tax is levied.
Recommendation for developing effective taxation systems and legislation to meet global
principles
The recommendation are provides to all the three nation in context of meeting the global
taxation principles. There are important links between the different tax policy instruments. The
pressure is on the revenue from the trade liberalisation, regional integration tax competitions
which means that throe is absence of regather taxation policy coordination (Ferry, Eckersley and
Van Dooren, 2015). In this regard all three nations are required to accord with their domestic
political will and leadership which are the primary drivers for the developing a capacity to meet
the global taxation principles.
For Hungary is suggested to raise its corporation rate to reach at the level of tax rat of that
of UK and US have a globally accepted rate or to be near that rate. In the capacity of building a
global level taxation system UK, US and Hungary are recommended to improve the efficiency
and transparency of its taxation system. The revenue cost of preferential tax treatments is widely
recognised as a key element of fiscal transparency and, as such, a potentially powerful tool in
avoiding and scaling back preferences that do not generate some offsetting social benefit.
Along with this tax expenditure analysis can also prove to be extreme help in assessment
of cost and benefits. This is step towards evaluation of the preferential treatments on those found
not to generate net social gains.
Direct tax: is that tax which is directly applicable on the income, property and wealth of the
individual and companies. It includes income tax, corporate tax, wealth tax, capital gain
taxes.
Indirect tax: is levied indirectly on taxpayer and is generally applied on goods and services.
This includes customs, excise, Goods and services tax.
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TASK 2
Implication of taxation liabilities for unincorporated organisations
Unincorporated business and its characteristics: this type of business are not
registered under the legal framework. No need to pay taxes on profits earned, the liability of the
owner are unlimited.
Advantages disadvantages
 No nee to pay corporation tax
 No legal formalities are required to
form such type of business.
 No legal remedies can be sought in the
court.
 The business and owners are not
separate legal person.
The unincorporated organisation are the one which are not registered under the
Companies law 2006 of the United Kingdom. This includes the sole trader and the partnership
business with unlimited liabilities, clubs, charities. The unincorporated businesses are not legal
entity. The members are personally responsible for any debts and contractual obligations of the
member. With no status of a legal entity and a having a distinct identity separate form its
members and organisation the taxation liability is not imposed on such businesses. The
unincorporated business are not required to pay taxes when the business starts to earn profits.
The profits are taxed with the corporation tax rate of 20% and there is no provision of allowance
as well.
The taxable profits of unincorporated businesses include the money the business have
earned from:
 doing business
 investment,
 Selling the asset for the money more than the cost of that assets, this is referred as capital
gains.
Calculations of the taxation liabilities for unincorporated organisations
Taxation liabilities for unincorporated business:
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The profits of unincorporated businesses are also taxed. The tax adjusted profits and
dividends between partners or sole trader are taxed. The income of each partner and of the sole
trade taxed as per the rate of income tax slab.
Use of Formulas to calculate the taxable liability:
Taxable income of Henry:
Monthly payment to Henry: £3,083. 33
Loan @10% = £6999.9 (buying shared in Employee controlled company)
Another Loan @12% = £5000 (buying double glazing houses)
Building society interest £2000 each year
Income tax and interest on qualifying loans:
The interest amount paid on certain qualified loans is first deducted from non-saving
incomes, then from the interest income and the remains amount is set off against the dividend
income (Jorgenson and Yun, 2016). The loans which are qualifies under the income tax act 2007
of the UK of whose interest can be claimed as deductions from the income off that year:
 For buying the shared in or to lend money to a business in which a person own shares f
5% or more.
 For buying the shares in a limited company where a person is in full-time employment,
 To buy the shares or lend in money for the partnership business.
 To acquire the shares in employee-controlled company.
As per the provision of the Income tax act 2007:
Loan taken out to acquire any part of the ordinary share capital of an employee-controlled
company falls under the ambit of tax relief. This have certain pre requisites which are, the shares
must the shares must be acquired by the individuals either before the company became
employee-controlled, or no later than 12 months after it became employee-controlled (Claim
loan interest against tax, 2018). A loan to invest in a co-operative also qualifies for relief.
The limit of relief is restricted to the total qualifying amount of loan interest relief. Other
reliefs included each year to the greater amount of £25000 and 25% of total income.
Calculating the taxable income of Henry for 2017-2018
Particular Monthly Total Amount in £
Monthly payment to Henry £3,083. 33 36999.96
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Building society interest each
year
- £2000
Interest on the loan of £6999.9
@ 10%
- 699.99
Total taxable income of
Henry
38299.97
Interpretation and analysis of the data
From the above explanation and the calculation of the data it can be interpreted that tax
implication of unincorporated organisation is completely different from the taxation of the
individual income. For the individuals the tax liability is ascertained as first determine the
taxable incomes for the given financial years and the subtracting the deduction allowed under the
income tax act 2007 to reduce the taxable income amount (Avi-Yonah and Xu, 2016). The
amount reached is then taxed as per the rate give in the incomes tax slab.
On the other hand, the for the unincorporated businesses the tax liability arises when such
business starts to make profits. The tax is charged as per the corporate tax rate of 20% and the
activities are also defined which can results in generation of the profits. Furthermore, for
individual the capital are taxed at different rates 28% of trustee representativeness and 10% for
gains of qualifying capital gains (A Guide to Corporation Tax for Unincorporated Associations,
2018). For the unregistered business the profits are also determined as profits and charged with
corporation tax rate of 20%.
TASK 3
Explaining the taxable liability for both public and private organisations
Unincorporated business and its characteristics: this type of business are not
registered under the legal framework. No need to pay taxes on profits earned, the liability of the
owner are unlimited.
Advantages: this types of business is not required to be registered and no need to pay
corporation taxes.
Disadvantages: the owners and partners are required to pay income tax on the profits
generated from the business. Also the liability of the owners is unlimited in this business.
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Public limited company:
In the public limited company’s corporation tax is applicable. Ads a public limited
company Ford Motor Plc is required to abide with all the laws and regulations of the taxations it
requires ot pay taxes on the profits of the business at the rate of 20%. moreover, the business is
will be taxed on its capitals gains earned by it from selling the property and assets of business
with the percentage of corporation tax rate. The rental and property incomes are also charged
under the same head for the Ford Motor Plc. For the public limited company is the gifts and
donation are not charged to tax if they are under the prescribe limit that on is requires to pay the
taxes on such gifts (Chaiseeand Ji, 2018). Being public company the shared of the company are
listed on the stock exchange are traded in the public and the business distribution the dividends
to the shareholders out of its operating profits. The Ford Motors Plc is required to pay dividend
tax at the rates 7.5% for a dividend of 1000 pounds.
Private limited company:
Morgan motor being a limited company is not required to pay income tax and national
insurance unlike a sole trader. Instead, it is required to pay corporation tax on its profits. Being a
limited company, the business calculated its profits by deducting its business expenses such as
salaries and costs. The incomes are charged with a corporation tax rate of 20%. For the limited
company a dividend allowance is given under taxation law of 5000 pounds (Taking salary and
dividends – best tax strategies, 2018). The dividend distributed is first deducted with 5000 and
then is charged to tax with a rate of 7.5% all other provision related with property income,
capital gains, gifts and donation are same as that of public limited company.
Determining the taxation liability of incorporated organisations
Incorporated organizations: are those businesses which are registered one under the
companies act, 2006 and other legal framework. It has a separate legal identity distinct from its
owners and members. Moreover, the business pay corporation tax on the dividend distributed by
it at the rate prescribed at that time.
2. Calculations of the profits chargeable to corporation tax for each accounting period:
Trading profits: 18000
Property income (500*18) : 9000
Capital gain :25000
gift and domination: 5000
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Corporation tax: is the tax to be paid by a business organisation on its total earned
income for a financial year. In the UL the corporation tax rate is 20%. this is the rate at which the
total assessable income is taxed, and the business is required to pay the same.
Capital gain tax: The capital gains on the sales of long terms or short terms assets by an
organisation are taxed under the corporation tax (Evers, Miller and Spengel, 2015). The business
organisations pay corporation tax on the profits earned from selling their asset.
Property incomes: The property incomes is received by the organisation in the form of
rental income This is also taxed with the rate of corporation tax
Gifts and donations: As per the internal revenue services the gist tax is applicable to the
individuals. The corporations are not required to pay gift tax unless it qualifies for the tax
purpose. The tax is required to be paid by someone with the organisation or the person to whom
it is gifted generally it is the employees
Interpretation of data and determination of taxation liabilities, for incorporated organizations.
For the incorporated organization the tax liability is defined under the taxation law of the
United Kingdom. The incorporated business is registered under the Companies act 2006 and are
recognized as legal entity under the law. The business gets a separate legal identity distinct from
its members and directors. These entities are requiring t pat taxes on their earnings and profits at
the rate of 20% of corporation tax. The gifts and donation given by company are not taxed until
that are recognized to be taxable. Moreover, the property revenues in form of rental incomes and
capital gains from selling the assets of the business are also taxed as per the corporation taxes.
TASK 4
Evaluation of the impact of key legislation and ethical constraint on different organisations
regarding taxation responsibility
Moral principles and business ethics:
A business is required to follow the ethical norms imposed upon it under the legal
framework. This requires organization Ford Motor Plc to conducts its operation in ethical
manner. This means to indulge in all legal action and avoid illegal activities. To treat each
employee equally. To follow all the legal rules precisely, pay taxes no time, do not try to avoid
tax payment.
A business organisation which is incorporated under the respective laws of the country in
which it is operating is required to abide with several laws and legislation in order to conduit he
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business activities. One of the various laws there is one law related with taxation where the
business is requires to pay taxes on the profits earned, dividend distributes, sales and exporting
activities. The business are requires compulsorily to adhere with taxation responsibilities in both
legal and ethical manner (Kiss, and Mosberger, 2015). Both legal and ethical requirements have
different meanings and approaches. Under the legal one all the laws, legislations and
governances must be followed to determine the tax liability and to pay it on time by filing the
returns. On the other hand, the ethical compiles requires the organisation to follow the morals
and values of the business and as well of the individuals in conducting the business operation and
complying the taxable responsibilities.
The tax responsibility of an organisation considers the following expected:
 The tax responsibility includes managing the tax affairs
 Payment of right amount of tax in the jurisdictions and complete the accurate tax
return and pay tax due within the time frame set by legislation.
 Not taking any type of tax advantages or divert the profits from higher tax
jurisdiction to lower tax jurisdiction.
 To operate under the policies to ensure that there is no artificial diversion of
profits between high and low tax countries.
 Commitment to maintain and improvise the tax transparency comply with global
initiatives in this regard.
 To undertake the tax planning supporting the genuine commercial activity.
 To abides with the requirements of the value added tax, file retune before the
due’s dates. If any interest and penalties are imposed due to late filing, it must
also be paid on time.
 To follow all the rules of national insurance.
The legal constraints of taxable responsibility:
The legal constrains considers the Key aspects of relevant legislations art regional,
national and international level. The relevant legislation applicable to the organisation under the
taxable responsibility
Application to Ford Motor Plc in United Kingdom:
The taxation law applicable to the Ford Motor Plc in the United Kingdom is the
Corporation Act 2009 and Vat. The organisation is required to abide by this law and pay the
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taxes on its profits by 20% every year (Chronowski and Varju, 2016) The authority to levy and
collect the taxes on profits of this business is the local jurisdiction where the registered office of
the company is situates. Moreover, for the transaction at international level the tax is levied and
collected by HMRC.
The organisation is file the tax return on the time to avoid penalties and fines. Also, there
is a requirement to not to indulge in any activity to overrule ant of the provision of the
corporation act as to reduce the tax liability or to transfers the profits to less taxable branch of the
group that is Hungary. As the corporation tax rate in Hungary is just 9% whereas in the United
Kingdom it is 20%. So, the group shall not try to transfer the profits.
Application in Ford Motors Plc in Hungary:
The legislation applicable to the Ford in the Hungary are Act LXXXI of 1996 over the
corporation tax and Dividend tax and the vat regulation. The corporation tax rate is 9% and the
business is required to file returns and pay tax with this rate.
The Ethical constraints of Taxable responsibility:
Ethics: the ethics are the morals, values and beliefs of a person or organisation that
guides the conduct of that person in the direction of rights way. Under the ethics a person takes a
deicide over a situation or matters with prevailing circumstances on the basis of what is there
right thing to do morally.
Ethical consideration in business organisation:
Tax compliance means complying with the tax rules and regulations which encompasses
the filing, reporting and payment of tax (Social or Ethical Issues Companies Face in a Foreign
Market, 2018). Two of the aspects of noncompliance with tax are the tax evasion and tax
avoidance. Under the ethicality concept tax evasion id considered to be illegal act of reducing the
tax but the morality of tax avoidance is determined as a legal act of minimising the tax.
Ethical constraints of United Kingdom:
As the corporation tax rate is high in the business must not undertake any activities which
can reduces it profits by transferring to the Hungary. The ford motor plc must also try to reduce
its tax liability by evading profits rather it can try to reduce it by finding the ethical way to do it.
Ethical constrains of Hungary:
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The Ford branch in the Hungary must not indulge in any unethical practice to accepting
any unrecognised profits from other branches in order to reduce their tax liability and reducing
their tax implications.
CONCLUSION
From the above reports it can be concluded that taxation is one of the crucial aspects for a
business organisation. The Ford Motor Plc operating in all three nations that UK, US and
Hungary is required to follow the taxation polices and act of the respective nature. There are
different acts and polices related with tax implications on Ford in each of the nation. The
taxation systems of them have been critically evaluated. For the unincorporated business and
individuates the tax is applicable with a different rate and have distinct rules. The tax implication
over the public and private incorporated organisation have been defined in the reports one is the
Ford Motor Plc and another is Morgan Motor. Furthermore, in the lase section of the report it has
been articulated that taxable responsibilities have both ethical and legal constrains over the Ford
Motor Plc. This have been determined in the context of the business situated in Hungary and
United Kingdom. The assignment have highlighted the taxation applicability on incorporated and
unincorporated businesses. Also, the moral and ethical principle applicable to the Ford motor plc
have been outlined.
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Picciotto, S., 2015. Indeterminacy, complexity, technocracy and the reform of international
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Snape, J., 2015. Tax law: Complexity, politics and policymaking. Social & Legal Studies. 24(2).
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