Comprehensive Analysis of UK Tax Environment and Tax Liabilities

This assignment analyzes the UK tax environment, focusing on various aspects such as the types of taxes, government policies, and the role of tax practitioners. It details the obligations of taxpayers and the implications of non-compliance, including penalties for late payments and inaccurate tax returns. The assignment includes calculations of chargeable profits, corporation tax liability, and capital gains. It also identifies chargeable assets, computes capital gains and losses, and calculates capital gains tax payable. The analysis incorporates relevant UK tax legislation, such as the Taxation of Chargeable Gain Act 1992, and provides detailed workings and interpretations of the calculations, offering a comprehensive overview of the UK tax system and its practical application for a company's tax obligations.

TASK 1
1.1 Describe the UK tax environment
Tax environment refers to the varied types of tax that are charged by the regulatory
authority on the company and individual. It also encompass the rules, regulations and policies
that are related to income and corporate tax. In order to promote business in UK in past few
years government focus a lot on specific areas. The main target of government is to reduce tax so
that more and more relaxation can be given to the business firms. Such kind of behavior also
promote firms to make more and more investment in the nation. In FY 2015 UK government
reduce tax rate to 20%. As part of new tax policy investment allowances are also given to the
business firms. Annual investment allowance is the amount of capital expenditure which a firm
entitled to claim against the taxed in any year. UK tax environment is currently evolved by the
government in order to provide support to the business firms. In this regard those small and
medium size companies that are involved in research and development activity can claim 230%
of total research and development expenditure that they made in the product innovation at the
workplace. If due to research and development activity firm face a loss in its business then same
can be carried forwarded and set off against future profits. Rate of VAT in UK is 20% and in
current time period it is not charged on transport, books and cloths etc. Hence, government is
making an attempt to keep price of these things low in the market. All these things are clearly
revealing that UK government is making every possible changes to develop congenial tax
environment that support business firms.
1.2 Roles and responsibilities of tax practioner
Role of tax practioner
Tax practioner play a very important role in advising clients in relation to payment of tax.
Apart from this, tax practioner play a significant role in the preparation of tax returns for the
clients. Thus, it can be said that tax practioner is playing a big roles in ensuring that client is
paying accurate amount of tax to the firm. It must be noted that in most of cases individual that is
paying a tax does not have any knowledge about same. Hence, he is unable to compute the
amount of tax that needs to be paid to the tax authority. It can be said that tax practioners are
playing a vital role in ensuring that government is receiving accurate amount of tax from side of
those who are eligible to pay same.

Responsibility of practioner
The main responsibility of tax practioner is to ensure that client is making available each
and every sort of relevant information to him so that tax amount of fair value can be computed
and paid to the government. It is also main responsibility of tax practioners to ensure that they
are not involved in the manipulation of facts and figures that are related to the tax payment. This
is because tax amount is received by the government which is used for development and growth
of the nation. If taxpayer and consultant are in involved in the act related to concealing a facts
then it means that both are betraying a nation.
1.3 Obligation of tax payers and implications of non-compliance
Tax payers have number of obligations towards the regulatory authorities. One of the
fundamental obligation of tax payers is to pay tax on time. It the personal responsibility of
individual to pay tax on time to the government. This is because one is earning profit by making
use of nation resources and due to this reason it is responsibility of taxpayer to pay tax on time.
On this ground, it is assumed that it is the obligation of individual to pay tax on time. The second
and main obligation of individual is to make sure that he is paying actual amount of tax to the
relevant authority of the nation. Government cannot ensure and check that each individual pay
accurate amount of tax to the government. Hence, it is very obligation of individual to make sure
that reasonable amount of tax is paid to the relevant authorities. As per rules, agent on behalf of
clients fill an income tax. In case of late payment of tax or it is identified that inaccurate amount
is paid as tax then in that case government authority entitled to take action against tax payer not
his agent. It must be noted that agent is simply a medium through which relevant authority
directly communicate with tax payer. In case if accurate tax is not paid then penalty will be
charged on him. In case of VAT if return is not received on time then tax department is entitled
to impose a penalty against the firm. Similarly, penalty is also charged on the firm when it does
not pay accurate amount of tax to the government. It can be said that if in any case firm does not
comply with rule then as per regulations penalty can be charged on same.
TASK 3
3.1 Calculate chargeable profit of the company
Operating profit 100000
Add: Disallowed expenses

Depreciation of asset 10170
Amortization of lease hold property 3000
Total disallowed expenses 113170
Less:
Debenture interest payable 67200
allowable deduction for lease premium 2255
capital allowance 27520
16195
Profit of overseas branch 30000
Trading profit 46195
profit from property business 30000
Interest income 10000
Chargeable gain 50000
Taxable profit 136195
Working note
Table 1Deduction for lease premium
Premium received 110000
less deduction 110000*0.02*(10-1) 19800
Amount assessed on
the landlord 90200
Table 2 Deduction allowable for this year
Amount assessed on
the landlord tire life
span
90200
deduction for this
year (90200/10)*3/12 2255
Explanation
Corporate tax is the taxable amount that is charged on the business firm as per law by the
relevant authority. As per law, business firm, have its own independent identify. It can be said
that company is a separate entity from its owner. It is well known fact that income of individual
and corporate vary from each other. Due to this reason different income tax slab if prepared for
the corporate in terms of payment of income tax. As per rules, firms are not liable to pay double
tax. The mentioned name is the one of the most important term of the income tax. Point must be

noted that as per rules if any firm already pay a specific tax then it is not liable to pay it again.
For example: TDS which is also known as tax deduct at source is charged only once from
individuals. In UK according to relevant rules and regulations profession tax is levied only on
operating income of the business. Relevant sort of tax is not charged on the income from other
sources like lease property etc.
Rules related to income tax give an exemption of lease premium in legitimate way. This
is the reason due to which assesse get a premium valued at £100000. Income tax provisions
allow assesse to obtain relaxation of 2% of aggregate premium value. Total deduction of 19,800
is obtained by the assesse which is computed by deducting 2% of 1, 00,000.
Apart from this, entire rent value cannot be amortized in 12 month
time period. This is the reason due to which, on proportion basis deduction
is given at assesse. In this regard it can be seen that in second table on
quarterly basis deduction is given. Hence, amount assessed by landlord is
divided quarterly.
3.2 Calculation of tax liability of company
Operating profit 100000
Add: Disallowed expenses
Depreciation of asset 10170
Amortization of lease hold property 3000
Total disallowed expenses 113170
Less:
Debenture interest payable 67200
allowable deduction for lease premium 2255
capital allowance 27520
16195
Profit of overseas branch 30000
Trading profit 46195
profit from property business 30000
Interest income 10000
Chargeable gain 50000
Taxable profit 136195
Corporation tax 32686.8
marginal relief for the company 1980
30706.8

Relief from double taxation 5000
taxable amount for the company 25706.8
Interpretation
MTS cleaning services
TASK 4
4.1 Identify chargeable assets
According to UK tax legislation, any assets which disposal or sales give rises to the
assessment of CGT (Capital Gain Tax) is called chargeable assets. For instance, if an entity
generates profit on the disposal of long-term non-current assets is called capital gain and HMRC
charge a specified rate of tax on such gains, called CGT. With reference to UK, Taxation of
Chargeable Gain Act, 1992 is applicable on profits that are realized from the sale of fixed assets.
Thus, it can be said that the value increase in an assets from that of written down value is
indicates capital profit. In other words, difference between the cost of an assets and its disposal
value is taken as capital gain on which tax rates will be applied by HMRC. As per UK taxation
laws, CGT is levied on the disposal of stock, bonds, commercial assets, Jewellery, land and
building, shares, goodwill, antique, painting etc. However, on the other side, residential property,
car, lottery, government securities, life insurance policies and investment in personal equity are
the exempted or tax-free assets. It must be noticed that short-term CGT taxes are computed
without any indexation whereas long-term capital gains are indexed for tax determination. The
main purpose of indexation is to make adjustment of inflation.
4.2 Computing capital gains and loss
As already stated that the difference by which an individual obtained a higher value than
its cost is called CG. Contrary to this, if the disposal value of assets is less than its cost than it
indicates capital loss. In the current scenario, three kind of chargeable assets A, B and C is
available to Lucy which have been disposed off at £100,000, £40,000 and £50,000 respectively.
Thus, total capital gain has been calculated here as under:
Capital gain/loss = Disposal/sale value of assets – assets cost
Name of capital asset Disposal value Asset cost Capital gain or (loss)

(In £) (In £) (In £)
Chargeable assets, A 100000 80000 20000
Chargeable assets, B 40000 15000 25000
Chargeable assets, C 50000 68000 (18000)
Total capital gain 27000
According to the presented table, it can be seen that for the year 2015/16, Lucy earned
total capital gain worth £20,000 and £25,000 whereas on the disposal of C, he gained loss
amounted to £18,000. Thus, the total of CG net of loss is £27000 for the entire year.
4.3 Computing capital gain taxes payable
As per the amendments of taxation laws in 2016, person who pays income tax at basic rate
will be liable to pay CGT at 10% that has been declined by 8%. However, on the other hand, an
individual to whom HMRC charge taxes at higher rate will be accountable to pay CGT at 20%
which was 28% in previous year. Referring the given scenario, for the year 2015/16, Lucy’s total
taxable income is £32,000 which is less than £43,000; therefore, he will be liable to pay income
tax at basic rate of 20% and CGT at 10%.
CGT computation of Mr. Lucy for assessment year 2016-17
Particulars Amounts
Total capital gain (£20,000+£25,000) £45,000
Capital loss from assets C £18,000
Net CG (£45,000 - £18,000) £27,000
Annual deduction allowable as per CGT Act, 1992 £11,100
Taxable capital gain £15,900
CGT due (£15,900*10/100) £1590
By taking into account the following table, it can be seen that total CG of Lucy is £27,000
and as per CGT act, 1992, HMRC provides annual allowance of £11,100 to the person.
Therefore, taxable CG is £15,900. Therefore, Lucy’s CGT liability for 2016/17 will be £1,590.
Form 45