What are three things that the UK tax system encourages?
- Individual saving habits by offering tax incentives on savings accounts such as ISAS
- Charitable donations by offering tax relief.
- Entrepreneurs and investors by offering tax relief for investments in specified schemes
What are three things that the UK tax system discourages?
- Motoring by imposing fuel duties
- Smoking and drinking alcohol by imposing taxes
- Environmental pollution by imposing a variety of taxes on landfill, climate change levy and linking CO2 emissions to the taxation of company cars.
What is an example of progressive taxation?
What is progressive taxation?
As income rises the proportion of taxation raised also rises.
What is regressive taxation?
An income rises the proportion of taxation paid falls
What is an example of regressive taxation?
The tax on a litre of petrol is the same regardless of the level of income for a low income earner than a high income earner
What is proportion taxation?
As income rises the proportion of tax remains constant. ie 10% of earnings regardless of the level
What is the ad valorum principle?
A tax calculated as a percentage of the value of the item. For example VAT
What is income tax?
Payable by individuals on their earnings ie self-employment, employment and investment income
What are national insurance contributions?
Payable by individuals who are either employed or self-employed on their earnings. Also paid by employers in relation to their employees.
What is capital gains tax?
Payable by individuals on the disposal of capital assets
What are examples of capital assets?
Land, buildings and shares. Can also include antiques.
What is inheritance tax?
Payable by executors on the value of the estate of a deceased person. It can also be paid on certain gifts during an individuals lifetime.
What is corporation tax?
Payable by companies on their income and gains
What is VAT?
Payable on the supply of goods and services by the final consumer
With direct taxation, who does the tax-payer pay the tax to?
What is direct revenue taxes based on?
Income/profits and the more that is earned/recieved, the more tax is paid.
What are direct capital taxes based on?
Value of assets disposed of either through sale, gift or inheritance.
With indirect taxation, who does the tax-payer pay the tax to?
Collected through from the tax payer via an intermediary such as a retail shop. The intermediary pays this over to HMRC.
What does HMRC do?
Controls and adminsters all areas of UK tax law
What is the purpose of HMRC? (2)
- Make sure the money is available to fund the UK’s public services.
- Help families and individuals with targeted financial support
Who heads up HMRC?
What is the commissioners main jobs? (2)
- Implement statute law
2. Oversee the process of UK tax administration
What are the staff at HMRC known as?
Officers of Revenue and Customs
What is statute law?
A law which is mandatory. This is normally updated each year by one annual finance act that follows the proposals made by the chancellor in the autumn statement.
What is issued to ensure statute law is followed?
Statutory instruments which contain detailed notes
What is case law?
Case law refers to the decisions made in tax cases brought before the courts. Often the case challenges current tax legislation or argues a certain interpretation of the tax law. These rulings provide interpretation of the tax legislation.
What are HMRC’s statement of practice?
HMRC’s interpretation of the tax law and often provides clarification or detail of how these rules should be applied.
What are HMRC’s extra-statutory concessions?
Extra-statutory concessions allow a relaxation of the strict letter of the law in certain circumstances.
When do HMRC offer concessions?
Given where undue hardship or anomalies would otherwise occur
What are internal HMRC manuals?
HMRC’s own manuals, produced for their staff which give guidance on the interpretation of the law. They are also available to the public.
What are HMRC’s briefs?
Provide details of specific tax issue that has arisen in the year
What is the double taxation agreement?
Agreements between most countries have been established to decide how a particular individual/company should be taxed.
What is tax evasion?
The term tax evasion summarises any action taken to avoid or reduce tax by illegal means.
What are the two main forms of tax evasion?
- Suppressing information, and submitting false information
What is tax avoidance?
Tax avoidance is using the taxation regime to one’s own advantage by arranging your affairs to minimise your tax liability.
What are the five professional ethics?
Objectivity, professional competence in due care, professional behaviour, integrity, and confidentiality
What is objectivity?
Members should not allow bias, conflicts of interest or the influence of others to override objectivity.
What is professional competence and due care?
- Members have an ongoing duty to maintain professional knowledge and skills to ensure that a client/employer receives competent, professional service based on current developments.
- Members should be diligent and act in accordance with applicable technical and professional standards when providing professional services.
What is professional behaviour?
Members should refrain from any conduct that might bring discredit to the profession.
What is integrity?
Members should act in a straightforward and honest manner in all professional and business relationships.
What is confidentiality?
Members should respect the confidentiality of information acquired as a result of professional and business relationships and should not disclose any such information to third parties unless:
– they have proper and specific authority, or
– there is a legal or professional right or duty to disclose (e.g. money laundering).
• Confidential information acquired as a result of professional and business relationships, should not be used for the personal advantage of members or third parties.
What is money-laundering?
Money laundering is the term used for offences including benefiting from or concealing the proceeds of a crime.
What is the penalty for dishonest conduct of tax agents?