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The Difference Between Tax Avoidance and Tax Evasion

   

Added on  2020-10-22

11 Pages3076 Words375 Views
THE U.K TAX SYSTEM

TABLE OF CONTENTSINTRODUCTION...........................................................................................................................31.1 The difference between employment and self-employment, their advantages andadvantages to the client................................................................................................................31.2 The difference between Tax avoidance and Tax evasion and its implication on the clientsand government............................................................................................................................51.3 the purpose and types of taxation in the UK and the tax planning issues for the client andgovernment .............................................................................................................................61.4 The different sources of the tax law, the purpose of the professional and ethical frameworkin which accountants operate. .....................................................................................................8CONCLUSION................................................................................................................................9REFERENCES................................................................................................................................9

INTRODUCTIONThe united kingdom's tax system is complex and one of the longest tax codes in the world.It compulsory to have a National Insurance Number to pay taxes In UK. Present reports specifiesthe HMRC administrative system in context to UK tax system. This reports presents thedifference and advantage of employment and self-employment. The report also gives theoverview on the tax avoidance and tax evasions, and its implementations. The report presents thedifferent type of taxation system in UK . The report also presents the different laws of tax andthe frame works in which accountants operates.1.1 The difference between employment and self-employment, their advantages and advantages to theclient.National insurance contribution are made through payroll and income taxes. Employees ans self-employed person pay different tax and national insurance in United Kingdom. In UK tax systemthe employment and self-employment is defined as:Employment: a person is said to be employee if he is having a fixed salary for the fixednumber of hours. Employee is eligible to get holidays, sick pay, maternity/paternity leave andsimilar benefits. The employee has to be work according to the employer decisions. Salary of aemployee will includes compulsory insurances to cover your health, safety and other liability(Lang and et.al., 2015). The employees tax and National Insurance Contribution will be deductedfrom the salary and be paid to HMRC. This system is known as Pay As You Earn system.Self-employment: a person is called self-employed if he involves the person for whom heis doing the work in order to be paid. A person who is self-employed can work for differentpeople and can undertake the work when and where required. In the context of the Income taxand National Insurance Contribution, self-employed is person are responsible for paying rightamount of income tax and HMRC, he must be registered as self_employed with HMRC. Underself-assessment tax system, the person has to complete an annual tax return.The advantage and disadvantage of employment and self-employment are:Advantage of employmentDisadvantage of Employment1. The salary payment of the employees isThere is the less chance in changing the term of

fixed.the contract hence there is less opportunities forfuture growth.2. they are eligible to get paid holiday or sickleaves.Employees have to work under the employer'scontrol and direction.3. they get auto enrollment into a pensionscheme.Employees has to give prior notice beforeleaving the company, they cannot leave withoutgiving any notice (Dustmann and Frattini,2014).4. they get ability to expect all rights grantedunder the contract of employment.They have to pay higher rate of NIC.5. employees get opportunity for furthertraining/certification at company expenses.There would be lack of flexibility regardingholiday dates and length of holiday.6. proper payment of salary on time and lessdeduction in other taxes from the income.Increasing in salary payment are likely to beminimum and infrequent.The advantage and disadvantage of self employed are:Advantage of self-employmentDisadvantage of self-employment1. in self-employment there is a freedom towork There is no job security in self-employmentand because of no more work available, therecould be a state of no longer in employmentcan come2. there is greater flexibility and control overworking.There is no benefit of paid holiday in self-employment (Gemmell and et.al., 2018).3. there is a benefit from the lower rates of NICand more willing to support in other taxes.A requirement to bear cost of the business.4.there is an advantage of having cash flow There will be no employment law protection.5. to be able to react to market forces and cancharge more for their services according tomarket.A requirement to put right poor quality work atown cost.

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