C5 - Different Taxes And Their Implications

Question 1

Direct taxes - tax on income

Answer 1

Capital gains
Corporation
Income
Inheritance
Stamp duty land/reserve

Question 2

Indirect taxes - tax on expenditure

Answer 2

Customs duties
Excise duties
Insurance premiums
Vat

Question 3

Income tax

Answer 3

Vary on individuals income

Rate based on earned/unearned income

Question 4

Earned income

Answer 4

Salary
Trade
Bonus
Pension

Question 5

Unearned income

Answer 5

Bank interest
Rent
Dividend

Question 6

Tax systems

Progressive

Answer 6

Increases as individuals darlings increase

Question 7

Tax system

Proportional

Answer 7

Flat line regime

Jersey

Question 8

Tax system

Regressive

Answer 8

Tax rate falls as level of income that is subject to tax rises

Question 9

Corporation

Answer 9

Levy on profits of firm

Rates for different profit levels

Question 10

Capital gains tax

Answer 10

Tax on profit or gain when chargeable asset disposals off

E.G land, building, shares, personal possession

Question 11

Not subject to capital gains tax

Answer 11

Wasting income - Cars

Main residence

Gifts

Individual income

ISA

Question 12

European Union savings tax directive

Answer 12

Resident of EU who have overseas investment. Aim enable savings income in interest payments

Question 13

Foreign account tax compliance act

Answer 13

FATCA - US designed to limit evasion of US tax payers hiding offshore accounts by placing reporting on foreign financial institutions

Question 14

Concepts of residence and domicile

Residence

Answer 14

You’re a non-resident for tax year if you meet any overseas tests

Question 15

Automatic Overseas test

Answer 15

1 - resident for 1+ year, -16 days in UK in tax year

2 - not resident for any 3 tax year, spend fewer than 46 days in U.K.

3 - full time work overseas without significant break and -91 days, no days which you work +3 hrs is less than 31 days

Question 16

Automatic residence test

Answer 16

1 - 183+ days in U.K.

2 - U.K. Home all/part time of tax year. 1 period of 91 days which you spend sufficient time and either

• no overseas home
• spend more time in UK than anywhere else

Question 17

Suffice tries test

Connecting ties-

Answer 17

Residence 
Family 
More time in U.K. Than anywhere else
U.K. Presence in previous 2 tax year
Substantive work in U.K.

Question 18

Arising basis of taxation

Answer 18

Resident in U.K. pay tax on all income as it arise

Question 19

Remittance basis of taxation

Answer 19

Non-domicile/resident pay U.K. only tax on foreign income and gains bringing to U.K.

Question 20

Domicile

Answer 20

Origin - birth

Dependency - until of age, domicile follows whom they’re legally dependent

choice - leave current domicile

Deemed - resident 17/20 last years