UK Taxation: Calculation of Tax Obligations and Compliance Procedures

This assignment provides a comprehensive overview of the UK tax system, examining various aspects of taxation including income tax, corporation tax, and capital gains tax. It explores the roles and responsibilities of tax practitioners and taxpayers, detailing the obligations of tax compliance and the implications of non-compliance. The assignment includes practical calculations of taxable income, expenditures, and allowances for both employed and self-employed individuals, demonstrating how to complete tax documentation for tax return filing. Furthermore, it presents detailed scenarios involving the calculation of chargeable profits, tax obligations for companies, and the calculation of capital gains and losses, alongside the associated tax liabilities. The conclusion summarizes the key findings, and relevant references are provided to support the analysis.

UK TAXATION

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Understanding the taxation environment of UK....................................................................1
1.2 Tax practitioners role and responsibilities.............................................................................3
1.3 Taxation obligation of tax payers and agents & liability for the non-compliance.................4
TASK 2............................................................................................................................................5
2.1 Calculating relevant income, expenditures and allowance....................................................5
2.2 Calculation of taxable amounts & self-employed income.....................................................7
2.3 Completion of tax documentation for tax return filling.........................................................7
TASK 3............................................................................................................................................8
SCENARIO 1..................................................................................................................................8
3.1 Calculating chargeable profits...............................................................................................8
3.2 Calculating the tax obligation of the company......................................................................9
3.3 Explaining income tax deductions.......................................................................................10
TASK 4..........................................................................................................................................10
SCENARIO 2................................................................................................................................10
4.1 Discussion of chargeable assets...........................................................................................10
4.2 Calculation of capital gains and losses................................................................................11
4.3 Calculation of net capital gain tax payable..........................................................................11
Lucy has liability to pay £1,590 as CG tax to HMRC...................................................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

Index of Figures
Figure 1 UK tax revenues in 2015/16............................................................................................2
Index of Tables
Table 1 Calculation of taxable income from employment..............................................................5
Table 2 Calculation of taxable income from self-employment.......................................................6
Table 3 Calculation of tax obligations.............................................................................................7
Table 4 Calculation of profit chargeable to corporation tax of Unicorn.........................................8
Table 5 Calculation of tax liability of Unicorn for AY 2016/17.....................................................9
Table 6 calculation of capital gain of Lucy for 2015/16...............................................................11
Table 7 Capital gain tax rate in UK during 2015/16 and 2016/17.................................................11
Table 8 Calculation of capital gain tax of Lucy for AY 2016/17..................................................12

INTRODUCTION
UK government finances its budgeted expenditures through collecting revenues from
various sources. Tax is one of the most important sources of capital wherein government charges
number of taxes i.e. income tax, corporation tax, capital gain tax and many others segregated into
two, direct as well as indirect. In UK, Exchequer creates taxation legislations and decides tax
rates however; HMRC owes the responsibility of tax collection. It is the mandatory obligation of
taxpayer to pay off their tax obligations within the time limit otherwise, taxation authority has
legal right to charge lawsuits for such default in the form of penalty. The current project aims at
examining and analyzing UK tax system & its implication along with the analysis of tax
practitioner duties & accountability. Besides this, practical illustration will be use to support in-
depth understanding of the taxation calculation with the appropriate evidences and assumptions.
TASK 1
1.1 Understanding the taxation environment of UK
UK tax environment
UK tax legislative framework
Direct taxes
 Capital gain tax
 Income tax (Saving,
non-saving, dividend)
 Corporation tax
Indirect taxesTax year
 HMRC
 Tax
practitioners
 Tax payers
Parties involved
 Value Added
Tax
 Custom duty
 Excise duty
6th April
2016 to
5th April
2017