Introduction to UK Tax

Question 1

What role does tax play in the UK economy

Answer 1

The role of tax in the UK is:
- Revenue generation
- Behavioural influence
- Redistribution of wealth

Question 2

How can tax change behaviour

Answer 2

Tax can change behaviour through targeted taxes (e.g. sugar tax, tobacco duty)

Question 3

What does progressive tax support

Answer 3

Progressive tax supports socio-economic equity by redistributing income across equity

Question 4

What do taxes help fund

Answer 4

Taxes help fund essential public services and infrastructure

Question 5

What are the four Adam Smiths cannon of taxations

Answer 5

Adam Smiths four cannons of taxation are:
- Equity
- Certainty
- Convenience
- Efficiency

Question 6

What does the cannon of taxation equity mean

Answer 6

Adam Smiths cannon of taxation equity means: Taxes should be proportionate to an individuals ability to pay, ensuring fairness

Question 7

What does the cannon of taxation certainty mean

Answer 7

The cannon of taxation certainty means: Taxpayers should know what, when, and how they must pay

Question 8

What does the cannon of taxation certainty reduce

Answer 8

The cannon of taxation certainty reduces disputes and increases compliance

Question 9

What does the cannon of taxation convenience mean

Answer 9

The cannon of taxation convenience means collection should occur at a time and in a manner convenient to the taxpayer

Question 10

What does the cannon of taxation efficiency mean

Answer 10

The cannon of taxation efficiency means the cost of the collection and compliance should be minimal related to revenue raised

Question 11

What might modern tax systems also consider with the cannons of taxation

Answer 11

Modern tax systems might also consider:
- Flexibility
- Simplicity

Question 12

What does a tax system being flexible mean

Answer 12

A flexible tax system means it has adaptability to changing economic services

Question 13

Why should a tax system be simple

Answer 13

A tax system should be simple to reduce avoidance and administrative costs

Question 14

What are direct taxes levied on

Answer 14

Direct taxes are levied directly on individuals or entities

Question 15

What are examples of indirect taxes

Answer 15

Examples of indirect taxes are:
- Income tax
- Corporation tax
- Capital gains tax

Question 16

What do direct taxes reflect

Answer 16

Direct taxes reflect an individual or entities capacity to pay

Question 17

What are indirect taxes levied on

Answer 17

Indirect taxes are levied on consumption

Question 18

What are examples of indirect taxes

Answer 18

Examples of indirect taxes:
- VAT
- Excise duties

Question 19

What can indirect taxes do to lower-income houses

Answer 19

While easier to collect, they can disproportionately affect lower-income households

Question 20

What are the sources of UK tax law

Answer 20

Tax law in the UK are derived from multiple sources:
- Statute law
- Case law
- HMRC guidance
- EU law

Question 21

What are statute laws

Answer 21

Statute laws are primary Finance Acts passed by Parliament

Question 22

What is case law

Answer 22

Case law is judicial decisions interpreting tax statutes

Question 23

What do HMRC statements influence

Answer 23

HMRC statements influence practice

Question 24

When does the tax year for individuals run from

Answer 24

For individuals the tax year runs from 6 April to 5 April the following year

Question 25

What is the accounting year for companies

Answer 25

Companies use the financial year: 1 April to 31 March

Question 26

When was HMRC formed

Answer 26

HMRC was formed in 2005

Question 27

What merged to form HMRC

Answer 27

HMRC formed through the merger of Inland Revenue and Customs & Excise

Question 28

What is HMRC responsible for

Answer 28

HMRC is responsible for: - Administering taxes and customs duties - Enforcing compliance - Collecting National Insurance Contributions (through NICO)

Question 29

What's the legal obligations required under self assesment

Answer 29

Under self-assessment, the legal obligation falls on the tax payer to: - Calculate their own tax liability - Summit tax returns accurately and on time - Pay any tax due without promoting

Question 30

What does self-assessment reflect a shift from

Answer 30

Self-assessment reflects a shift from reactive to proactive compliance

Question 31

What digital platform helps with self-assesment

Answer 31

Making Tax Digital(From April 2019) helps with self-assessment

Question 32

How may taxpayers dispute HMRC decisions

Answer 32

Taxpayers may dispute HMRC decisions by: - Appealing within 30 days of the decision notice - Engaging in internal reviews or progressing to the First-Tier Tribunal and higher if necessary

Question 33

How are most disputes with HMRC resolved

Answer 33

Most disputes are resolved through negotiation

Question 34

What mutual expectations does the HMRC charter establish

Answer 34

The HMRC charter establishes mutual expectations: - Taxpayers can expect fair treatment, clear communication, and accessible support - HMRC expects honesty, accuracy, and respectful engagement

Question 35

What is tax evasion

Answer 35

Tax evasion is illegally avoiding taxes by concealing income or falsifying income

Question 36

What are the penalties for tax evasion

Answer 36

The penalties for tax evasion are: - Summary conviction - up to 6 months in prison and unlimited fine - Indictment - up to 7 years in prison

Question 37

What does tax evasion undermine

Answer 37

Tax evasion undermines fairness and erodes public trust

Question 38

What is tax planning

Answer 38

Tax planning is a legal way to reduce tax liabilities

Question 39

What are examples of tax liabilities

Answer 39

Examples of tax liabilities are: - ISAs - Pension contributions

Question 40

What is tax avoidance

Answer 40

Tax avoidance is exploiting loopholes to gain tax advantages not intended by Parliament

Question 41

What does aggressive tax avoidance include

Answer 41

Aggressive tax avoidance includes complex schemes designed to circumvent tax laws

Question 42

How is tax avoidance and evasion combatted

Answer 42

Tax avoidance and evasion is combatted by: - Disclosure of Tax Avoidance Schemes (DOTAS) - General Anti-Abuse Rule (GAAR)

Question 43

What does DOTAS require

Answer 43

DOTAS regime requires early reporting

Question 44

What does GAAR counter

Answer 44

GAAR counters abusive arrangement

Question 45

When was GAAR introduced

Answer 45

GAAR was introduced by the Finance Act 2013