Analysis of the UK Tax System and its Impact on Small Businesses

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Unit 30 Assignment: Taxation

Table of Content
• Introduction of taxation System in United Kingdom
• HM Revenue and Custom in United Kingdom
• Taxes Included in Tax structure
• Income Tax through PAYE
• Value added Tax on small business
• National insurance tax in United Kingdom
• Taxation Applicability on small business
• Comparison of Taxation structure between nation

Table of Content
• Key Implementation in taxation system
• Key legal and ethical constraints for business
• Impact of legal and ethical constraints on small business
• Impact of legal and ethical constraints on small business
• Various Trade bloc in global market
• Impact of Trade bloc on international market
• Recommendation for minimizing impact of legal constraints
• Conclusion

Introduction of Taxation System in United Kingdom
• Taxation is the trigger forces which influenced business activities in many of the
way.
• In United Kingdom Taxation policies are govern by Central government in
which they make tax statute for businesses in the market.
• Finance act is the body which regulated the taxation law in united kingdom
• HMRC is the body which manage the administrative function of Tax collation
for United Kingdom.

HM Revenue & Customs In United Kingdom
• For each and every business in united kingdom their is a governing authority
which assess and collected tax liability. The name of governing body is HM
Revenue & Customs.
• This department established by act of parliament in 2005 which replaced Inland
Revenue and Customs and Excise.
• HRMC leads by Treasury minister who are able to drafts strategic tax policies
and policy development.

Taxes Included in Tax Structure in United Kingdom
• Income Tax Through PAYE
• Value Added tax
• Excise and Custom Duty
• Environmental taxes and Inherent Tax.

Income tax Through PAYE
• Income tax is the taxable liability which is imposed on taxable income of
assesse during financial year through their business activities.
• PAYE is the option in which tax payer or employer can pay directly tax on
taxable income of employee during the financial year before monthly payment to
employee.

Value Added tax on Small businesses
• Value added Tax imposed on sales of Business in the market.
• VAT and other state taxes mostly charges on small businesses as they are engage
in the business of trading in the market.
• This kind of taxes depends on Business activities in which Three rate are used:
• Standard Rate - 20%
• Reduced Rate - 5%
• Zero rate - 0%

National Insurance Tax in United Kingdom
• In United States national insurance tax is paid by employer on behalf of employee which reflects
in their salary slips
• National insurance tax depend on income of business on which business divided in two class for
taxation –
• Class-1
• Class – 2

Taxation applicability on small business
• For current year, Small business in united kingdom face tax rates which are –
• 19% for Corporation tax
• Dividend tax – 7.5%, 32.5% and 38.1%
• Inherent tax @ 40% on $325000 threshold
• Vat – 20% on standard rate for products of business

Comparison of Taxation Structure between nations
Particular United Kingdom Spain
Corporate Tax ( New business) 19% 15%
Value added tax 20%, 5% and 0% 21%, 10% and 4%
Dividend tax 7.5%, 32.5% and 38.1% 19% and 21%
Inherent tax 40% 7.65% - 34%

Comparison Between Two Nations for small business
United Kingdom • High revenue for
Government
• Provide high relief
in rebates
Spain • Adequate tax
Structure for
business
• Lower penalty
litigations for
business