Short Word Q's Flashcards
(26 cards)
Tax classical system, 1965
On income tax and on profits
So company’s and owners paid corporation tax- twice- double taxation
Less incentive for new bus start up
Doesn’t recognise relationship between company and shareholders
Shareholders also taxed- double
But benefits- more revenue for gov and large dividend allowance
Badges of trade
Length of ownership- long ownership less likely to be trade- investment
Frequency- regular transactions of sale of goods- trading income vs capital gains
Entrepreneurs relief
Introduced following capital gains reforms
Provide relief for entrepreneurs selling their businesses
Up to £10,000,000 10% lifetime
Imputation corporation tax
Tax on profits is imputed to shareholders- given tax credit part of the tax- avoids double tax
Used in U.K. before dividend allowance
Capital gain def
Increase in wealth to an individual or company because of selling asset
Charged on net gains (less incidental cost of disposal and original cost)
Annual exemption 11100 same as income
Can carry forward losses to offset against profits next tax year
Charities exempt
Chattel
Tangible moving property
Wasting chattels exempt from cgt if useful life less than 50 yrs
Chattels exempt if gross proceeds less than £6000
Research and development treatment
R+D incentivised with 230% allowance for expenditure- not capital
Aims to encourage investment in tech
Sme’s in loss can claim cash
Hypothecated tax
Designed to provide specific benefits
E.g graduate tax- used to fund higher education
Advantages- clear to public where their money going- less scrutiny - viewed as fair
Disadvantages- concerns where money going- right amounts e.g grads low tax- not enough for education
Realised capital gains tax
Date capitals gains are received following sale is when recognised in accounts
Prevents recognising when the gain hasn’t been received- guessing- manipulation - underestimate- less tax
Types of company tax systems
Classical- company/shareholder relationship ignored, pay tax on income and capital gains- double taxation
Imputation- used in U.K.
Tax imputed- shareholders have tax relief
Split rate- distinguishes distributed and retained earnings
Ads and dis of registering vat
Ads
Credibility to bus, forces accurate accounts, recover input tax
Dis
Customers who aren’t registered can’t claim back
Admin burden
Advantages of implementing capital gains
Taxes wealth of individuals and companies as well as income
Meet equity principle
Equality- redistribution of wealth through tax
Increases gov revenue
What nic’s used for
Nhs Pensions Unemployment/sick benefits Technically not a tax Argument- should be merged with income tax?
NIC type of rate
Flat % out of salary - paye
Used to be like insurance for services
Regressive
Introduced 2014
Allowance for business and charities to reduce nic by 3000
Means small businesses may not have to pay
Vat
Indirect tax on products/services
Manufacture wholesale and retail
Vat collection
Multistage- at each of production and distribution
Collected based on value added at each stage e.g input and output
Example of vat debate
Jaffa cakes
Cakes and biscuits- no vat
Chocolate biscuits charged
Tribunal
Tax planning
Least amount of tax payable whilst considering cash flow
Tax compliance when:
Seek to comply with law in all countries operate
Full disclosure of relevant info
Seek to pay right amount but no more at the right time
Tax avoidance- when discouraged
legal way of minimising tax liability
Exploits loopholes
Less tax is paid than expected in one country it operates in
Tax paid on profits declared in a country where they haven’t been earnt- tax havens
Paid later than the profits
Tax evasion
Illegal to reduce tax bill
E.g cash in hand- micro crime
Manipulation example
Consultant- to hide employment for tax advantages
Employment vs self employment
Aim of environmental tax
Change behaviour to have a positive impact on climate change
Raise revenue- used to cut taxes in other areas
