Taxation and Its Implications on Mr. Desai: A Study

Running head: TAXATION
Taxation
Name of the Student:
Name of the University:
Authors Note:

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TAXATION
Contents
Introduction:....................................................................................................................................2
Answer 1:.........................................................................................................................................2
Answer 2:.........................................................................................................................................3
Part a:...........................................................................................................................................3
Part b:...........................................................................................................................................4
Answer 3:.........................................................................................................................................4
Part a:...........................................................................................................................................4
Part b:...........................................................................................................................................4
Part c:...........................................................................................................................................6
Answer 4:.........................................................................................................................................7
Part a:...........................................................................................................................................7
Part b:...........................................................................................................................................7
Part c:...........................................................................................................................................7
Par d:............................................................................................................................................8
References:......................................................................................................................................9

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TAXATION
Introduction:
In the United Kingdom (UK) the responsibilities in relation to the collection of taxes,
state support payments and administration of different regulatory regimes are vested on the non-
ministerial department of the country called Her Majesty’s Revenue and Customs, here in after
to be referred to as HMRC in this document. Taking into consideration the guidelines provided
by HMRC the discussions have been made in this document about the tax implications on Mr
Desai.
Answer 1:
To describe what constitutes trading the Corporate and Business Tax Law Notes have
specified six badges of trade. It is important use these badges of trade to assess whether
particular operations conducted by a person is a trade or not.
Six badges of trade are discussed below to assess whether Mr Desai is carrying on a trade or
vocation.
Subject matter of realization: The subject matter of realization is to be assessed to determine
whether particular activities carried on a person is to be assessed as trade or not (James, 2016).
Ownership duration: In case the objective is to conduct the operations in the long run then the
operations and activities conducted by the persona can be assessed as trading.
Transactions frequency: The frequency of transactions should be considered, i.e. whether the
transactions are regularly taking place or are few and far between. In case the transactions are
regularly taking place then these shall constitute trade.

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TAXATION
Supplementary or the work is for business organization: Are the transactions are supplementary
in nature or there is proof of business organization. In case the transactions are supplementary in
nature then these shall not be considered as trading activities (Burkhauser et. al. 2016).
Motive and intentions behind transaction: The motive and intentions behind entering into
transactions shall be evaluated. If the motive behind entering into transactions is to earn profit
then the transactions shall constitute a trade.
In Denman J in Partridge v Mallandaine the difference vocation and trade has been clearly
outlined by the honourable judge. The intention of the person entering into different transactions
shall be given the most important consideration to determine what constitutes trade and what
constitutes vocation (Miller and Oats, 2016).
In this case since the intention and motivation behind entering into the transactions was to earn
profit and the transactions are large in quantity hence, the transactions carried out by Mr Desai
shall constitute trading.
Answer 2:
Part a:
As per section 5 of Income Tax Act 2005 income tax is charged on the amount of profits
from trade, profession and vocation. Non-payment of eligible of income tax to the credit of Her
Majesty could be due to tax avoidance or tax evasion. There is thin line between the two. A brief
description about the two and the differences between the two would be helpful in understanding
that whether there has been tax avoidance or tax evasion on the part of Mr Desai (Devereux, Liu
and Loretz, 2014).