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Taxation Law Assignment (PDF)

Added on - 08 Dec 2020

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Taxation
Table of ContentsINTRODUCTION...........................................................................................................................1QUESTION 1...................................................................................................................................1Advice to Mr. Desai....................................................................................................................1QUESTION 2...................................................................................................................................2a) Difference between tax evasion and tax avoidance................................................................2b) Measures taken by HMRC to counteract any abusive arrangement.......................................3QUESTION 3...................................................................................................................................4a) General rule that governs whether or not expenditure is allowed when computing tradingprofits..........................................................................................................................................4b) Items of income and expenditure statement along with their explanation.............................4c) Calculating adjusted trading profit for Mr Desai....................................................................5QUESTION 4...................................................................................................................................6a) Date for registering for VAT..................................................................................................6b) How and when Desai will have to submit its quarterly VAT liability...................................6c) Benefit of Flat – scheme for business....................................................................................6d) Advice for customer default in their payment........................................................................6CONCLUSION................................................................................................................................7REFERENCES................................................................................................................................8
INTRODUCTIONTaxation is a charge which is imposed by government on citizens and corporate entities.Taxation is described as a system which governmental authorities finance their expenditures bycharging money from people and spent it on various things such as education, health, publicwelfare, defence and many more. Main aim of this project report is to build an understandingabout the concept of taxation in United Kingdom. In this project report, case study of Mr Desai isevaluated who is an antique collector. As a trainee tax manager of chartered accountant firm,situation of Mr. Desai is analysed in order to advice him about his tax liabilities. HMRC isconsidered as the relevant tax authority for this case and British Taxation law is followed.Difference between tax avoidance and tax evasion is discussed in this report along with variousmeasures taken by HMRC. Tax expenditures are calculated in this report for various situations(Meade, 2013).QUESTION 1Advice to Mr. DesaiMr. Desai has a vocation of collecting antiques and restoring them before selling for asmall amount of profit. Mr Desai does this activity on a regular basis and sometimes even buysantiques in a large quantity. Neighbour of Mr. Desai informed him that HRMC can term hisactivity as trading and can declare his earning an act of tax evasion.According to Section 5 of Income tax (Trading and Other Income) Act 2005, trading istrade that enables a user to earn any income from a profession or vocation. Taxable income fromtrade under this act is defined as the profits of a trade, profession or vocation. There are variousbadges mentioned in this act and six of them are discussed below:Profit seeking motive –Badges of trade are the number of tests which are developed bycourt. Motive behind conducting a trade activity is required to be identified in order to determinewhether profit motive is involved or not. In this case, Mr. Desai has a profit seeking motive(Badges of trade,2018).Frequency of similar transactions –In this test, frequency of business activitytransactions are examined in order to identify whether these activities are continuous or not. Inthe case of Mr. Desai, he is conducting a continuous business.1
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