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Introduction To Taxation Flashcards

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1
Q

Where do the basic rules of the UK tax system come from?

A
  1. Tax legislation
  2. Case law
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2
Q

What updates tax legislation?

A

Finance Act

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3
Q

How often is tax legislation updated?

A

Annually (in the finance act)

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4
Q

Detailed notes on an area of tax

A

Statutory instruments

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5
Q

Efficiency principle

A

Cost of collection of tax should be less than the tax raised

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6
Q

HMRC

A

Controls and administers most UK tax

Doesn’t make the tax rules

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7
Q

Does HMRC issue further guidance to explain and interpret tax law?

A

Yes

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8
Q

Document providing HMRC’s interpretation of tax law and clarification/more detail on how it should be applied?

A

Statement of practise

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9
Q

What is given to specific taxpayers to relax the tax legislation?

E.g. undue hardship or anomalies

Technically illegal and being phased out

A

Extra-statutory concessions

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10
Q

HMRC’s internal working documents

Also made public

A

Internal guidance manuals

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11
Q

Sources of tax practice

A
  1. Statements of practice
  2. Extra-statutory concessions
  3. Internal guidance manuals
  4. HMRC website
  5. HMRC press releases
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12
Q

Objectives of tax

A
  1. Economic objectives
  2. Social justice
  3. External influences
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13
Q

Economic objectives of tax

A

Used to direct the behaviour of businesses and individuals

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14
Q

Neutrality principle

A

Tax shouldn’t distort choice

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15
Q

What does the current UK tax system encourage?

A

Individual saving
Charitable donations
Entrepreneurs + investors
Environmental actions

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16
Q

What does the current UK tax system discourage?

A

Driving petrol and diesel vehicles
Drinking alcohol
Unenvironmantal actions

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17
Q

Equity principle of tax

A

Tax should be fair and just

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18
Q

Fairness tax principles

A
  1. Direct/indirect principle
  2. Progressive/regressive principle
  3. Unit/Value principle
  4. Ability to pay/Benefit principle
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19
Q

Direct/Indirect principle

A

Direct v Indirect taxes

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20
Q

Direct taxes

A

Paid by those who generate funds

E.g. income, capital gains, corporation tax

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21
Q

Indirect taxes

A

Transaction based
Relate to consumption

E.g. VAT

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22
Q

Progressive/regressive principle

A

Progressive v regressive taxes

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23
Q

Progressive taxes

A

Increase with income

E.g. income tax

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24
Q

Regressive taxes

A

Decrease with income

E.g. NI

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25
Unit/Value principle
Unit taxes v value taxes
26
Unit taxes
Flat rate per item, regardless of value E.g. beer duty depends on strength not price
27
Value taxes
% of value of goods/services E.g. VAT
28
Ability to pay principle
E.g. income tax
29
Benefit principle
E.g. NHS
30
Main external influences to UK tax
EU (Though not now we quit) International tax treaties Global concerns
31
What are most of the UK’s international tax treaties based on?
OECD model tax treaty
32
OECD
Organisation for economic cooperation and development
33
Examples of global concerns affecting tax
COVID Climate change
34
Types of UK tax (examinable at PTX)
1. Income tax 2. National insurance 3. Corporation tax 4. Capital gains tax 5. Value added tax
35
How is income tax collected?
PAYE
36
What is IT paid on?
Earnings Both employment and self-employment
37
Who pays NI?
1. All employed or self-employed individuals 2. Businesses in relation to its employees
38
CT
Paid by companies On all income and gains
39
Who pays CGT?
Individuals On the disposal of capital assets
40
Capital assets e.g.
Land Buildings Shares Antiques
41
Who pays VAT?
The final consumer
42
What is the financial year?
1 April to 31 March
43
What is the tax year?
6 April to 5 April
44
In what year do corporations pay corporation tax?
Financial year
45
In what year do individuals get taxed?
Tax year
46
Who are individuals from a tax standpoint?
Employees Sole traders Partners
47
How often will companies tell HMRC about their tax with MTDfB?
Quarterly
48
When will MTD be phased in?
From 1 April 2019
49
Who does MTDfB apply to at the moment?
Businesses For VAT Only over the annual registration limit
50
What is the annual VAT registration limit since 1 April 2017?
£85,000
51
Who will MTD apply to when finished?
All businesses (Incorporated and unincorporated) Self-employed Landlords
52
Will MTD have any exemptions when finished?
Yes Limited
53
HMRC responsibilities examples
Collecting and administering taxes IT, CGT, NIC, CT, VAT Paying & Administering Universal credit, Tax credits, Child benefit Collecting student loan repayments Ensuring minimum wage adherence Protecting society from: Smuggling, Tax fraud, Illegal importation of drugs
54
Does HMRC have various powers to help it meet its responsibilities?
Yes E.g. ‘Information notice’
55
2 types of compliance checks on tax returns
1. Pre-return checks 2. Already submitted returns enquiries
56
When must HMRC give notice of the intention to conduct a tax return enquiry by? If filed on time
12 months after the actual filing date
57
When must HMRC give notice of the intention to conduct a tax return enquiry by? If filed late
The ‘quarter day’ following the 12 month anniversary of the actual filing date
58
What are the ‘quarter days’?
31 Jan 30 Apr 31 Jul 31 Oct
59
What can HMRC do if the tax return isn’t received by the filing date?
Make a DETERMINATION (estimate) of the tax due And treat this as the amount owed
60
What is the deadline for making a tax determination?
3 years from the statutory filing date
61
Is a determination displaced by the eventual calculation of the actual tax due?
Yes
62
What can HMRC do if it finds info about a taxpayer’s tax affairs after the normal time limit for compliance checks has passed?
Discovery assessment
63
Raising a discovery assessment time limit: No careless or deliberate behaviour
4 years From end of relevant period
64
Raising a discovery assessment time limit: For ‘careless behaviour’
6 years From end of the relevant period
65
Raising a discovery assessment time limit: For ‘deliberate behaviour’
20 years From end of the relevant period
66
Act of HMRC taking money directly from taxpayer’s bank account
Direct recovery
67
Conditions that must be met for HMRC direct recovery?
1. Issued notices to bank For taxpayer to not withdraw amount due For bank to pay HMRC 2. At least £1,000 3. Time to raise objection 4. Taxpayer must be left with at least £5,000 Over all their bank accounts 5. HMRC satisfied that the taxpayer is aware the sum of due
68
What can a taxpayer make an appeal against?
1. Information notice 2. Compliance check doc request 3. Compliance check amendment 4. HMRC right to raise discovery assessment 5. Discovery assessment 6. VAT assessment 7. Imposition of penalty
69
How must an HMRC appeal be made?
In writing
70
HMRC appeal deadline?
30 days
71
HMRC appeal must include?
The grounds for the appeal
72
Will any tax due during an appeal have to be paid?
Yes Unless postponed
73
How are most HMRC appeals settled?
By agreement
74
What happens if HMRC appeals aren’t settled by agreement?
Heard by the Tax Chamber of the First-tier Tribunal
75
Individual who assists clients with their tax affairs
Tax Agent
76
Dishonest conduct by tax agent definition
Tax agent acted dishonestly Leading to loss of tax
77
What can HMRC do if it has evidence of a tax agent’s dishonest conduct?
1. Issue file access note To obtain their working papers 2. Issue conduct notice 3. Publish info about the tax agent
78
Dishonest conduct by tax agents penalty
A fine Between £5,000 to £50,000
79
What does the severity of the penalty for a dishonest tax agent depend on?
The tax agent’s behaviour
80
What are the penalties for a tax agent refusing to comply with a file access notice?
£300 fine Additional daily penalties of £60
81
Can a tax agent appeal a file access notice? (And late compliance I assume)
Yes
82
What is the other consequence of a tax agent being found to be dishonest by HMRC?
They will be in breach of professional ethical guidelines So disciplinary action by professional body, if a member of one

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