Corporate Taxation and Capital Gains

This assignment is focused on corporate taxation and capital gains in the UK. It requires students to apply knowledge of tax laws and regulations to a real-world scenario, specifically Elsie's situation. The assignment involves calculating her capital gains tax liability and determining the amount she will pay. Students are expected to demonstrate an understanding of key concepts such as marginal relief, taper relief, and tax avoidance strategies. The assignment also requires students to analyze the impact of tax policies on businesses and individuals, and to provide a critique of current tax laws and regulations.

TAXATION

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Describe the UK tax environment..........................................................................................1
1.2 Analyze the roles and responsibilities of the tax practitioners...............................................3
1.3 Explain the taxation obligations of the taxpayers or their agents and implications of non-
compliances..................................................................................................................................5
TASK 2............................................................................................................................................6
2.1 Calculation of relevant income, expenses and allowances....................................................6
2.2 Calculations of taxable amount..............................................................................................7
2.3 Calculations of complete relevant documentations and tax returns.......................................9
TASK 3..........................................................................................................................................11
3.1 Calculations of chargeable profits for the company............................................................11
3.2 Calculations of tax liabilities of the company......................................................................11
3.3 Explain how income taxation deductions deals...................................................................12
4.1 Identifying chargeable assets...............................................................................................13
4.2 Calculate capital gains and losses........................................................................................14
4.3 Calculate capital gains tax payable......................................................................................15
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................17

Table of Figures
Figure 1 Parties Involved in UK tax environment...........................................................................4
Figure 2 Expected taxable revenue in UK for 2017/18...................................................................5
Index of tables
Table 1 Calculation of chargeable capital gain for Elsie for year 2016/17...................................12
Table 2 Calculation of CGT payable by Elsie for 2016/17...........................................................13

INTRODUCTION
In United Kingdom (UK), Her Majesty Revenue and Custom is the central administrative
or non-ministerial taxation authority who is responsible to collect taxes and policies to procure
revenues. Tax is defined as a mandatory contribution which is imposed by the government for
collecting tax revenues for the benefits of society. There are varied types of taxes that are
imposed by the government classified into two, direct and indirect taxes such as income tax,
capital gain tax and others. Tax practitioners are responsible to comply with the laws to report
correct tax filling and keep up-date themselves with the amendments in legal provisions time to
time. The present research report aims at emphasizing upon examining the taxation environment
of UK and identifying the roles & responsibilities of the tax payers to report correct taxable
amount and tax duties to the authority. It will also apply different taxation provisions to
determine taxable amounts and tax liabilities of the taxpayers.
TASK 1
1.1 Describe the UK tax environment
Figure 1 Parties Involved in UK tax environment
[Source: Baumann and et.al., 2017]
According to HMRC, tax is defined as a mandatory or compulsory contribution that is
enforced by law and tax contributor has to pay their tax liabilities without getting nothing
recognizable return. The primary purpose of imposing taxes is to collect tax revenues for the
governmental expenditures so as to deliver numerous benefits to the society such as access to
healthcare, social security, economic stability and others. Chancellor of Exchequer is responsible
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to design tax legislative framework and impose it to gather tax duties. They design a sustainable
and fair taxation system so as to support public services and social care system. However,
HMRC is the administrative authority who collects taxes (Dahl and Lochner, 2017). UK tax
environment comprised of various kinds of taxes which are classified into two, direct & indirect
taxes, presented underneath:
Direct taxes: Such taxes are directly levied by the government on individual’s income,
business profitability and other gains. It can be either directly paid to the HMRC or can be tax
deducted at source (TDS), thus, actual burden is faced by the taxpayer.
Figure 2 Expected taxable revenue in UK for 2017/18
[Source: Budget, 2017]
Income tax is the most important direct tax from which HMRC collects major proportion
of their revenues. Evidencing from the expected governmental revenue for the AY 2017-18, it is
probable to collect £175 billion through charging income taxes. Besides this, Capital Gain Tax
(CGT), Inheritance tax and Corporation tax (currently 20%) (£52 billion) is charged by the
government on business profitability (Dowling, 2014). Apart from this, social security system
can be distributed into two parts, contributory & non-contributory schemes. Former entitled to
derive state benefits that are not linked with the National Insurance Contribution (NIC) as it is
based on the other measures whereas later is directly associated with the NIC i.e. retirement
pension, incapacity benefits, Widow’s pension, maternity allowance and others. As illustrated in
the above graph, it is expected to generate revenue worth £130 billion from NIC.
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Indirect taxes: In contrast to above, tax payers do not borne the actual burden of indirect
taxes charged on them as such tax duties are actually paid by the buyers. It is charged on the
product prices and adds in the selling prices, thus, in this way, buyer has to pay an amount
inclusion of taxes which is paid by seller to the government (Bankman and et.al., 2017). VAT,
excise duty and custom duty are several types of indirect taxes. Currently, Standard VAT rate is
20%, Vat fraction is 1/6 and reduced rate is 5%. For AY 2017-18, it is forecasted to collect
revenue of £143 billion and £48 billion from Value Added Tax (VAT) and Excise duty.
1.2 Analyze the roles and responsibilities of the tax practitioners
Tax practitioner is the professional expert who helps tax contributors in filling their tax
return to HMRC. Tax payer hires practitioners for completing the entire taxation requirement
appropriately. Practitioners works as a mediator between tax contributors and HMRC as they do
all the work on the behalf of actual tax payers and present it to non-ministerial authority, HM
Revenue & Custom (Basten, Ehrlich and Lassmann, 2017).
Roles of tax practitioners
Practitioners provide assistance to the tax contributors in preparation and submission of
tax return to HMRC. Thus, they play an important role in tax framework and ensure compliance
with all the tax requirements.
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Tax contributor
Preparation of records, documents and
other papers to comply with the tax
procedure
Tax consultation
& advice
Tax service industry
HMRCTax practitioners