UK Tax Environment- Report

TAXATION

TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................................3
TASK 1............................................................................................................................................3
AC 1.1 Describe the UK tax environment..................................................................................3
AC 1.2 Analyze the role and responsibilities of the tax practitioner..........................................5
AC 1.3 Tax obligations of tax payers or their agents and the implications of noncompliance...5
TASK 2............................................................................................................................................6
AC 2.1 Calculate relevant income, expenses and allowances.....................................................6
AC 2.2 Calculate taxable amounts for the employment at Supermarket and also calculate the
self-employment income with payment dates.............................................................................7
AC 2.3.........................................................................................................................................8
TASK 3............................................................................................................................................9
AC 3.1 Calculate the chargeable profit for the company............................................................9
2. Deduction for allowances of plant and machinery ...............................................................10
3. Property business profit.........................................................................................................11
4.1 Identify chargeable assets...................................................................................................12
4.2 Calculation of capital gains and losses................................................................................13
4.3 Calculation of capital gains tax payable..............................................................................13
CONCLUSION................................................................................................................................1
REFERENCES................................................................................................................................2

INTRODUCTION
Tax is denoted as a compulsory monetary contribution of people which is earned in the
form of state's revenue. In other words, Tax is an obligation for legal entities and individuasl
against their respective incomes and gains (Kaplow, 2011). The government of country is
responsible to assess and impose taxes on the activities, expenditure on individuals as well as
business entities. The fund raised from taxation activities are used for the welfare of society and
government causes. The report deals with describing the UK tax environment and shows an
analysis of the role and responsibilities of the tax practitioner. Along with this, tax obligations of
tax payers or their agents in relation to their implications of non-compliance are discussed in the
following unit (Gee, Haller and Nobes, 2010). Here, the report includes calculations of relevant
income, expenses and allowances, taxable amount in accordance with given case scenarios. The
sections also reflects the workings on the calculations of capital gains tax payable for a business.
TASK 1
AC 1.1 Describe the UK tax environment
The UK economy has a highly competitive corporate tax system, further, the taxation
policies are simpler, and transparent therefore, suits with modern business practice (Capital
gains tax for individuals on the disposal of shares, 2015). The government believes that
corporate tax system is an asset for the United Kingdom which improves business environment
and helps in attracting multinational companies to invest (A guide to UK taxation. 2013). The
UK government wants to make its taxation system as the most competitive tax regime in the
G20, in this regard, the corporate tax of the UK is declined to 20% in 2015 which is the lowest in
the G7and joint lowest in G20, even, in the lowest in the United Kingdom’s history (UK Tax
Environment 2014-2015, 2016). Including this, the country’s tax system is moved to territorial
system from system of worldwide taxation. As a support to creative sectors, government is
introducing significant tax reliefs. The government of the UK impose various taxes on
individuals and organizations which are as follows:
Personal Taxes and Income Tax: The major source of income for the UK government
is income tax, however, it has different slabs. The tax free income / free personal allowance is up
to GBP 10,500, further, on the income between GBP 10,500 to GBP 31,865 individuals have to
pay 20% tax (UK Tax Environment 2014-2015, 2016). The next level rate is 40% which is to be

paid up to GBP 150,000. Above GBP 150,000 the individuals have to pay 45% tax on taxable
income (UK Tax Environment 2014-2015, 2016). In addition to that personnel also pay social
costs against salary, for which, up to GBP 7956c individual gets free allowance, then up to GBP
41,860, 12.0% tax is paid (Kaplow, 2011). Corporation tax: This tax is paid by limited
companies including other organizations such as clubs, societies, associations etc. The rate
of corporate tax is reduced from 23% to 20% in 2015, which is lower since till date and
makes it easier to develop competitive tax environment.
VAT Tax: In addition to other taxes, VAT tax is another measure in the UK to earn
government revenues (King and Fullerton, 2010). The current rate of VAT Tax is 20%.
However, there are certain essential goods which are exempted from tax such as public transport,
books and newspapers, children’s clothing, etc. The corporate entities who have annual sales of
more than GBP 81,000 must register themselves for VAT.
Capital gains tax: Capital Gains Tax is imposed on the profits when sell or give
away something that has increased value (King and Fullerton, 2010). This tax is paid by
individuals who are normally resident in the UK, PRs, trustees and partners. The CGT
rate is too low in the UK as the highest rate is 28 per cent. Till the amount £10,900, the goods
are exempted from tax pay.
HMRC (HM Revenue & Customs) is accountable for protecting and maintaining UK’s
tax system while keeping eye on both direct and indirect taxes (McLaughlin, 2013). The entity is
also responsible for tax collection on the behalf of Government of UK. The main method of
paying tax is through PAYE scheme however, some of the individuals have to pay taxes via self-
assessment tax return. The use of this system facilitates automatic deduction of taxes from the
earning of employees, nonetheless, two main situations are there in which payment through self-
assessment tax return is needed. One is when individual is self-employed and other one in which
individual receive rental or foreign income. Including this, at the time when, it becomes difficult
to collect taxes via PAYE scheme, then self-assessment tax return system is used (Melville,
2013). The HM Revenue & Customs is also accountable for providing guidelines for the
assessment of tax practitioners and looking eye whether they are fulfilling tax obligations or not.
The new amendment in taxation system are to be included under HMRC (Gee, Haller and Nobes,
2010).