UGB 225 Business Taxation: Alternative Assessment Report 2020/21

This report, addressing the UGB 225 Business Taxation Alternative Assessment for 2020/21, delves into various aspects of business taxation. It begins with an analysis of Linda's trading profits, calculating the taxable income after adjustments for disallowed expenses and non-taxable income. The report then explores the criteria for employment versus self-employment, outlining the advantages of self-employment, including control, tax benefits, growth potential, and customer interactions, while also discussing the reasons behind IR35 cases. The discussion continues with an examination of the six badges of trade, providing insights into factors such as profit-seeking motive, the number of transactions, and changes to assets. Furthermore, the report covers different VAT schemes for VAT-registered companies and concludes with practical examples of inheritance tax and capital gains tax liabilities, providing a comprehensive overview of key business taxation concepts.

UGB 225 Business Taxation
Alternative Assessment 2020/21

Table of Contents
INTRODUCTION...........................................................................................................................3
QUESTION 1..................................................................................................................................3
Linda's trading profits for the year 31st march 2121:...................................................................3
QUESTION 2..................................................................................................................................4
Criteria for the use for employment for self employment, why people prefer self employment:
.....................................................................................................................................................4
Why prefer self-employment rather than being employed, resulting in so many IR 35 cases:...6
QUESTION 3..................................................................................................................................7
Discussion Six badges for trade:..................................................................................................7
Different VAT schemes for the various VAT registered companies:.........................................9
QUESTION 4................................................................................................................................11
Inheritance tax arising when the death:.....................................................................................11
Capital gain tax liability:...........................................................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Business taxation corresponds to taxes which organizations are required to pay as
component of their regular business activities. If there is a single owner, a partner, limited
liability partnership or an organisation, every organization is accountable for compliance
with tax regulations. The study-report covers various aspects of business taxation (Blakeley,
2018). This report covers topics such as trading profits, six trade badges, different VAT schemes
for different VAT registered entities, etc. Besides this, it covers practical sum on inheritance tax
and capital benefit tax obligation.
QUESTION 1
Linda's trading profits for the year 31st march 2121:
In business, trading profit is equal to the overall profits gained of its operations. It does
not require the funding of associated profits, the cost of earnings for the properties. It aims to
have a higher predictor of the potential of firms to conduct key market operations in attempt to
improve their performance. The benefit that the purchaser produces for the acquisition, the
selling of securities. The trade returns are large for a customer who understands the risks
involved in business transactions. These gains are made from buying, selling for items, services.
This statement depicts not allowable trades with firms that display income from trade. Trading
gains are income-generating profits for the company, costs which are not allowed for the
enterprise. These benefits which enable companies to make profits through their operations,
which enable businesses to achieve their targets (d’Andria, Pontikakis and Skonieczna, 2018).
There are different concepts of accounting that allow administrators to make financial
decisions. Accounting department reports transactions that enable company to meet its goals.
The Accounting Team produces a number of financial reports to help them maintain track. These
documents allow them to make financial arrangements, manage finances for commercial
operations to meet goals.
Linda’s trading profit (before deduction of capital allowances) for year ended 31 Mar 2021
Particulars/details £ Amounts
Net profits per accounts 6,96 0

Add: Expenditure which shows in the income
account but not allowable
Depreciation 2,500
Installation of new improved heating system 3,800
Telephone costs 220
motor expenses 650
Business entertaining 520
general bad debts provisions 200 7,890
14,850
Deduct
Income not taxable as trading income
Rental income 1,200
Bank interest receives 80 1,280
Trading profits 13,570
QUESTION 2
Criteria for the use for employment for self employment, why people prefer self employment:
Employment is paid employment contract between the employers and the employees.
Usually, the boss regulates what employee does including where employee works. Employment
is contract between employer and employee to offer some benefits to employee. In exchange, the
employee shall be paid salary or even hourly salary. While workers may discuss such things
in employment arrangement, terms and conditions decided solely by employer. The contract can
also be terminated by all parties. An employment arrangement with a particular employee may
be verbal exchange, written correspondence, or letter of work offer. The proposal of employment
could be implicit in interview or written in formal, official employment agreement. Employment
arrangements vary, since they can require various time obligations and pay-out systems (Clarke
and Kopczuk, 2017). For e.g., jobs may be as follows:

Hourly part-time jobs that are charged a fixed sum figure for every hour working. Full-time jobs
wherein the employee earns a wage and rewards from employer for the completion of the duties
needed by a specific role
A fixed schedule forcing workers to serve 40-hour week with hour for lunch including two 15-
minute rests, one in morning and one in afternoon, as mandated by state statute.
So as long as company retains its arrangement to pay off employee—and pay on time-limited
basis—and the employee wants to keep working with employer, employment generally
continues. Most of the working relationship among employer and employee is controlled
by employer's requirements, viability and theory of management. The work relationship is often
influenced by availability and desires of employees (Blakeley, 2018).
The meaning of self-employment is 'beginning and operating a profitable firm or social
organization Many successful corporations started this way when innovative males and females
invented an invention, set up a business or registered a trademark. While an outstanding business
concept plays a vital role in overall success/results of business, the execution of idea will
inevitably determine its destiny. Self-employment is often the only choice if choose to follow a
particular career choice. Journalism, some legal or medical occupations and the artistic and
creative artists are all fields of which self-employment or self-employed practise is a common
style of activity. Self-employed people are citizen who make livelihood by functioning for
himself or herself, not as employee of anyone else as well as not with the owners (shareholders)
of a company. However, there are different interpretations of 'self-employed' which vary slightly.
Self-employment is act of producing one's revenue directly from customer rather than becoming
a company job. Usually, tax officials will deem an individual for being self-employed when the
person wishes to be known as such or earns revenue in such manner that person is expected to
submit tax return in compliance with the law in effect in the applicable jurisdiction. In real
world, the main problem for taxation officials is not that of an individual selling, but that
of person making profit. In other terms, the practise of trade is expected to be overlooked where
there is zero profit. Consequently, sporadic and hobby-or enthusiast-based commercial activity is
usually neglected by the authorities. Self-employed individuals usually pursue jobs on their
choice instead of being hired by employer, gaining money from trade or a sector in which they
reside. In certain countries, policymakers put more focus on specifying whether a person is self-
employed either involved in disguised jobs, often defined as a pretence of intra-business

contractual arrangement to mask what is otherwise straightforward employer-employee
arrangement. There are, even then, certain personnel whose position is really not that clear. For
eg, one may operate from home as well as and using own computer, but report to an agency in
which someone monitors and manages their work. In both situations, a decision must be taken as
to if they are employee or self-employed individual (Carton, Corugedo and Hunt, 2017). This is
not sufficient for the individual paying to decide their classification; sometimes, payers are
biased, since they do not wish to share financial expenses and obligations of getting employee
(explained below). Even so, if one in doubt regarding your ranking, it is useful to reply the
following queries:
 Whether individual have power of how work is performed, that is do they work
independently without someone observing the work?
 Will they have upwards of one customer?
 Are individuals permitted to take clients with you anytime they choose?
 Could they delegate their work?
 Would they fail to do task?
 Will they have their own resources and equipment Example, When anything fails, do you
have their private computer, are they liable for charging for programme subscriptions, are
they responsible for fixing or upgrading their working tools?
 Are you selling yourself?
 Would they hire somebody else to perform work without somebody else's permission?
 Do they bear the burden and accountability for work done — for example if this is not
accomplished well, will they still be charged?
 Is there formal contract specifying the standards and requirements of work?
 Will they have their client invoiced?
 Have you been recruited to do a particular job?
Why prefer self-employment rather than being employed, resulting in so many IR 35 cases:
Control across all areas of business: The best benefit of self-employment is management
control of every part of the business. Individuals decide what to do with their
business. individual can pick targeted audience. They chose the marketing features that
make their business distinctive. Being self-employed sometimes ensures that one can set their
own targets, business mission and values. They are responsible for quality of the products or

services you sell. They chose all the employers they recruit, but instead of being stuck with co-
workers can't bear, they get to select the ones deal with each day.
Tax Benefits: Individuals may deduct certain costs related to running the company. Online,
mobile and fax charges are covered If individual use same mobile and internet within business as
they do for their personal usage, will only be entitled to subtract a part of bill. Travel and
corporate use of the vehicle are eligible for tax cuts. They will also exclude food and
entertainment expenses as they are relevant to work. When individual go back to education and
otherwise broaden their business-related skills, one will be eligible to deduct these expenditures
(Beckers, 2018).
Potential for Growth: Self-employment offers everyone practical experience throughout all facets
of operating business Working for oneself needs one to be efficient and can entail doing lots of
researches on various facets of their business. This covers such aspects as buying products,
handling employees, marketing and accounting. These skills stick with them as they expand that
business launch new business, and even plan to head back to working with somebody else.
Customer Interactions: When individuals are self-employed, individuals always do all the
working, particularly at the beginning. This ensures that you can develop good partnerships with
their clients They deal directly with any individual who utilizes their services or purchases their
goods. They get rare chance to continue to understand the clients, which offers them insights in
with what they desire. This connection will also help create customer loyalty and help hold them
returning to their business in future
QUESTION 3
Discussion Six badges for trade:
In year 1955, report of Royal Commission on Taxation of Profit sums as well as Income
evaluated case law and established 6 trade badges. It was starting point and, as one might
understand, several changes have taken place in the field complemented by case-law. Here are
key six trade badges, as discussed below:
1. Profit Seeking Motive: it is obvious that having desire to make profit may imply a
trading operation, but that's not sufficient on its own. In the scenario of the Salt v
Chamberlain – Ch D 1979, 53 TC 143; [1979] STC 750, research consultant suffered
damages on stock exchange after attempting to foresee market. The loss happened after

several cycles more than 200 transactions. It isn't seen as question of commerce and
money in existence. This was established that the selling of shares by private person
should never have exchange badges attached to them. Both sales are subjected to capital-
gains taxes.
2. Number of transactions: A sole transaction may be a commercial operation, which is
more representative if they are frequent and regular transactions. It was specifically seen
in the Pickford v Quirke – CA 1927, 13 TC 251. The union acquired a cotton-spinning
factory with the intention of utilizing it in exchange, but on the acquisition of mill it was
in poorer condition than was originally expected. The union then voted to strip mill of its
riches and selling it piecemeal, producing a profit. It's been replicated a lot of times
for number of mills. Owing to the recurring existence of the sales, it was stated
that profits were trade profits and taxed even so (Kaledin, Barkhatov, Kapkaev and
Shestakova, 2018).
3. Changes to the asset: It is necessary to acknowledge any improvements or adjustments
introduced to asset that can make it much more valuable. In case of Cape Brandy
Syndicate v CIR – CA 1921, 12 TC 358; [1921] members of wine syndicate entered a
new trade union to buy brandy in the South Africa. Some were sent to East, the rest have
been sent to the London to be mixed with French brandy, re-engineered and sold for
profit. The taxpayer sought to contend that the deal was of financial disposition as a result
of the selling of investment. This was held that trade or a company had been carried out
and could be calculated as trading benefit.
4. Way sale was carried out: In its advice, HMRC notes that this is always pointer if deal
follows those of 'undisputed trades.' Scenario CIR v Livingston and Others included three
unconnected people who, together, had acquired cargo vessel. That vessel was turned
into steam drifter then sold at profit. The acquisition was first vessel acquired by the three
persons. An evaluation was made of the benefit, which was identified as trading profit. In
the ruling, the judge mentioned that the measure to be followed to assess whether or
not undertaking as are now examining is of "trade" type is whether transactions
concerned are of same type and carry out in same manner as that are typical of ordinary
dealing in line of business wherein the endeavour was carried out.

5. Source of finances: It is necessary to ascertain the origin of financing before determining
if a transaction is carried out. Finance drawn out to buy an asset will, in first place, mean
that asset will need to sold in order to offset the debt.
6. Interval of period between selling and acquisition: The period of the ownership
of asset is important measure of trade. That longer period of possession, the more likely it
was to be an acquisition rather than trade. HMRC is still examine at intention, whether
one can show an intention that would imply tax treatment.
Different VAT schemes for the various VAT registered companies:
Value added tax is the kind of consumption taxation on goods where the value added by
each phase for supply chain is generated for distribution to consumers. The amount of VAT
charged by consumers for cost of the goods, the cost of the content used for products that are
already taxed. Value Added Tax (VAT) is mechanism where the value added tax is used
in process for the manufacture of products, services the company produces in attempt to meet its
objectives. VAT shall reimburse for sharing infrastructure offering certain locality
for States, taxpayers who use the facilities for the supply of products.
Not all local jurisdictions require VAT charges, exports are excluded. VAT is the
introduction of destination-based levy, where tax rates are basis for the position of the consumers
who registered for selling price of products, services. The terms VAT, GST, sales tax are used by
one another. Around a fifth increase in VAT on gross tax receipts. There are approaches for the
measurement of VAT, including the form of credit invoice, Account Basis. In credit-invoice
process, purchase purchases are taxable, the buyer is told of the value added tax on transactions,
and firms may obtain a credit for VAT charged on raw products or services (Shvets and
Synooka, 2020).
This is the main employee base system used by national VAT, apart from Japan. Account
basis formula, which involves company, measures the valuation on all taxable transactions of the
amount of all taxed expenditures in respect of which VAT fee applies in respect of difference of
values. This approach is only used by Japan, that also uses the terms Flat Tax, that are tax
elements of policies made by US legislators. There are common accounting approaches for
accounting principles. Accrual base accounting suits sales with the time of which they are
received and applies to costs for period of that they are produced. Though it's more complicated
than cash-based accounting, it gives a lot more detail about the company. Across-based

accounting lets company monitor receivables, accruals. The accrual method allows companies to
balance sales with their earnings costs, which leads to better profitability for enterprises.
Standard Scheme:
The standard approach is to maintain a comprehensive VAT log for both acquisitions and selling.
It can be manual logbook, or one can employ accounting systems to automatically compile VAT
details. The details would then be used to execute quarterly VAT return. One could file return
with HMRC then charge any VAT overdue. Users will get that money back when they've got lot
of operational cost and not lot of revenue (Olbert and Spengel, 2017).
Annual VAT accounting scheme:
It's much liked the traditional VAT accounting system, except that you're not going to fill up
quarterly returns. Alternatively, you get annual VAT and billing date. For convenience, some
corporations hold today as their corporate tax filing deadline. When you have finished the VAT
refund, start making quarterly intermediate payments for VAT you predict that you are owed.
This approach helps you to spend more closely, because since payments are distributed
over year, cash flows is always easier.
Flat-rate scheme:
In this arrangement, you basically pay as VAT proportion of your gross turnover. The exact price
you pay relies on type of business own – different businesses have varying fixed rate VAT
prices. One will also have to bill VAT on invoices, but one do not have to pay for VAT specifics
of any buy or selling. Only small companies with an average turnover of up-to £150,000 may use
such VAT scheme (Zeida, 2020).
Cash accounting scheme: Under cash accounting, user get VAT account for day of delivery as
compared to the day of collection of invoices. This could be extremely useful if one has sluggish
payers, so one won't need to pay VAT until paid. Even so, this choice is not well fit for
companies who purchase a tonne of credit products. One can’t recover VAT due until payment is
complete. As in traditional VAT accounting system, users will have to produce returns on a
quarterly basis. Businesses with gross turnover of £1.35-million can’t utilize annual accounting
system.

QUESTION 4
Inheritance tax arising when the death:
Particulars £ Amount
Value transfer 420000
Marriage exemption 5000
Annual exemptions
2013-14 14000
2014-15 14000 33000
Potential exempt transfer 387000
IHT liability 325000 at nil% 0
At 40% 154800
Taper relief deduction 60% 92880 61920
Death estate
Value for estate 880000
Spouse exemption (880000/2 ) 440000
Chargeable estate 440000
IHT liability 440000 at 40% 176000
Capital gain tax liability:
Particulars £ Amount
Net sales proceeds after costs
for disposal
496400

Costs for new boundaries cots 5200
Costs for replacing property
2800
2 8 0 0Incentives[edit]
The main reason that VAT has
been successful
8000
488400
Taxable income 13590
474810
Tax 28% for property 132946.8
CONCLUSION
From above study this has been articulated that each kind of business would have distinct
tax implications. Since tax obligation is legally binding obligation, individuals are expected to
pay taxes that they owe or they will suffer government fines. Tax obligation is a shorter-term
liability, which ensures that one have to settle it within one year. Short-term obligations, like tax
obligation, will be reported together in financial worksheets or financial statement.

REFERENCES
Books and Journals:
Blakeley, G., 2018. Fair dues: Rebalancing business taxation in the UK.
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assessment of R&D provisions under a common corporate tax base. Economics of
Innovation and New Technology, 27(5-6), pp.531-550.
Clarke, C. and Kopczuk, W., 2017. Business income and business taxation in the United States
since the 1950s. Tax Policy and the Economy, 31(1), pp.121-159.
Blakeley, G., 2018. Fair dues: Rebalancing business taxation in the UK.
Carton, B., Corugedo, E.F. and Hunt, M.B.L., 2017. No business taxation without model
representation: Adding corporate income and cash flow taxes to GIMF. International
Monetary Fund.
Beckers, A., 2018. The Creeping Juridification of the Code of Conduct for Business Taxation:
How EU Codes of Conduct Become Hard Law. Yearbook of European Law, 37, pp.569-
596.
Kaledin, S.V., Barkhatov, V.I., Kapkaev, Y. and Shestakova, E.V., 2018. SMALL BUSINESS
TAXATION IN EUROPEAN COUNTRIES: CRUCIAL POINTS, SPECIFIC
FEATURES AND POTENTIAL ADAPTATION OF ADVANTAGEOUS
OPTIONS. Journal of Fundamental and Applied Sciences, 10(6S), pp.1611-1629.
Shvets, Y.O. and Synooka, D.V., 2020. FEATURES OF TAXATION OF SMALL BUSINESS
ENTITIES IN UKRAINE: PROBLEMS AND DIRECTIONS OF
IMPROVEMENT. Bulletin of Zaporizhzhia National University. Economic Sciences, (3
(47)), pp.95-100.
Zeida, T.W.H., 2020. Essays on business taxation.
Olbert, M. and Spengel, C., 2017. International taxation in the digital economy: challenge
accepted. World tax journal, 9(1), pp.3-46.