Assignment on Taxation- Tax system in UK
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Added on 2019-12-03
Assignment on Taxation- Tax system in UK
Added on 2019-12-03
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TAXATION1
Table of ContentsINTRODUCTION................................................................................................................................4TASK 1 DUTIES AND RESPONSIBILITIES OF TAX PRACTITIONER.......................................41.1 UK tax environment..............................................................................................................41.2 Role and responsibilities of the tax practitioner....................................................................61.3 Tax obligations of tax payers or their agents and the implications of non- compliance.......7TASK 2: PERSONAL TAX LIABILITIES - INDIVIDUALS &PARTNERSHIPS............................72.1 Calculation of relevant income, expenses and allowances...................................................72.2 Calculation of taxable amount and tax payable for employed and self-employed, payment date..............................................................................................................................................9Taxable income and tax payable of individual............................................................................92.3 Documentation and tax.......................................................................................................10returns.......................................................................................................................................10TASK 3: CORPORATION TAX LIABILITIES................................................................................113.1 Calculation of chargeable profits........................................................................................113.2 Calculation of tax liabilities and due payment dates...........................................................123.3 Explanation of adjustment of income tax deductions.........................................................13TASK 4: CAPITAL GAINS TAX FOR INDIVIDUALS AND BUSINESSES.................................144.1 Chargeable assets................................................................................................................144.2 Calculation of capital gains and losses................................................................................144.3 Calculation of capital gains tax payable..............................................................................15CONCLUSION..................................................................................................................................16REFERENCES...................................................................................................................................172
INTRODUCTIONThe UK government aims to make its taxation system as one of the simpler and transparentto suit with the environment under globalization and modern business practices. It is for the purposeof making the system more of an asset rather than a liability on companies and individuals. Thefollowing report is prepared to gain understanding on the tax system in UK with focus on taxcollection methods, types of taxes, obligations and implications of non compliance. The report alsoincludes calculation of tax liabilities for employed and self employed individuals along withpayment dates. Furthermore, incomes, expenses and tax liabilities as well as deductions forcompanies are also calculated.TASK 1 DUTIES AND RESPONSIBILITIES OF TAX PRACTITIONER1.1 UK tax environmentPurpose and types of taxesThe purpose of tax collection is for three important reasons - to raise revenue, to promoteredistribution of income and wealth as well as to study the production and consumption of goods incontext with negative externalities (Abdo, 2010). Taxes are the sources of revenue for thegovernment which are used for the economic development of the country. It is a compulsorycontribution levied by the national government on individual, firms, properties. The tax is collectedthrough direct and direct methods. Direct taxes are paid on income earned while indirect taxes arelevied on the expenditure. The tax payment system in UK is divided into four major typesdescription of which is as follows-Income tax Income tax is chargeable on the income or profits earned by the individual throughcommercial or employment activities. General rate of income tax is 20% but it is proportionate innature. It is because, 40% tax is payable on income more than 31785. However, individuals areentitled to take benefit of personal allowance to reduce tax obligation.Corporation tax Corporation tax is payable by companies having separate legal entity on the chargeableprofits earned by them through business activities. In provisions of corporation tax association,unincorporated entities, clubs and societies are covered.Capital gain taxThis tax is payable on transfer of movable or immovable property by one party to theanother. In order to avoid double taxation, amount of profit is considered for tax instead of revenue3
earned by them. Inheritance tax This tax is payable when property or other monetary benefit is received by the individual onthe account of death on any person. However, this tax liability is supported by various exemptionsand tax brackets.Different methods of tax collectionDescription of different methods of tax collection is enumerated below-PAYE Tax - individual receiving pension through employers to other sources entitled for taxpayment. This tax is automatically deducted from the pay.Self Assessment tax return - Individual need to pay taxes if they are -self employed as a business partner, director, trusteerental incometaxable foreign incomereceiving other untaxed incomeTax legislation UK tax legislation is set by the government and HMRC through Acts of Parliament andStatutory Instruments. Her Majesty's Revenue and Customs (HMRC) is responsible for taxcollection in UK. The non ministerial unit of government of UK is also responsible for payment ofstate support and administration of regulations. The department is authorised to collect all forms oftax payment and to ensure the safe flow of money through collection, compliance and enforcementof laws and regulations. It was established with the purpose to ensure availability of money forpublic services in UK and to help individuals and families in terms of financial support (Leicester,2006). HMRC works on six main objectives which are as follows -To maximise the revenue for public services and for increasing the credits and payment toindividuals and businesses.To maximise the return to tax payers against their payments.To improve the customer experience and business environment in UK through costreduction.To improve the performance of IT service.To improve relation with stakeholders.To improve the capacity and build a healthy business environment for HMRC (Parry andSmall, 2005).4
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