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ACA Tax > Chapter 1 - Intoduction To Taxation > Flashcards

Chapter 1 - Intoduction To Taxation Flashcards

1
Q

Q: What document updates UK tax legislation annually, following proposals from the Chancellor’s Budget?

A

A: The Finance Act.

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2
Q

Q: What is the purpose of statutory instruments in UK tax law?

A

A: They provide detailed notes on specific areas of tax statute.

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3
Q

Q: What role does case law play in tax law?

A

A: It involves court decisions on tax cases, which interpret tax statutes and often provide binding guidance.

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4
Q

Q: What is the efficiency principle in tax practice?

A

A: The cost of tax collection should be less than the tax revenue raised.

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5
Q

Q: Who is responsible for administering most areas of UK tax law?

A

A: HM Revenue and Customs (HMRC).

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6
Q

Q: What are HMRC’s statements of practice?

A

A: They offer HMRC’s interpretation of tax law, providing clarification on its application.

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7
Q

Q: What is an extra-statutory concession in tax law?

A

A: A relaxation of tax legislation given to specific taxpayers to prevent undue hardship or anomalies.

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8
Q

Q: Why are extra-statutory concessions being phased out?

A

A: Their legality was challenged in 2005, so they are gradually being withdrawn or legislated.

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9
Q

Q: What are HMRC’s internal guidance manuals?

A

A: Manuals produced for HMRC staff, but also made available to the public.

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10
Q

Q: How does HMRC use its website to support tax practice?

A

A: By providing PDF leaflets aimed at the general public that explain various tax issues in non-technical language.

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11
Q

Q: What is the purpose of HMRC press releases and explanatory notes?

A

A: They detail specific tax issues that arise throughout the year.

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12
Q

Q: What is the impact of a government’s tax and spending system on a country’s economy?

A

A: It significantly impacts the economy by influencing various factors like inflation, employment, and trade balances.

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13
Q

Q: What does the neutrality principle state regarding taxation?

A

A: Taxes should not distort economic choices.

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14
Q

Q: Which tax relief initiative promotes entrepreneurship and investment in the UK?

A

A: The Enterprise Investment Scheme.

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15
Q

Q: What activities does the UK tax system discourage?

A

A: Driving petrol and diesel vehicles (via additional fuel duties) and alcohol consumption (through high taxes on alcoholic beverages).

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16
Q

Q: What mechanisms does taxation use to address environmental issues?

A

A: Landfill tax, climate change levy related to energy consumption, and taxing company cars based on CO2 emissions.

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17
Q

Q: What is the equity principle in taxation?

A

A: It posits that taxation should be fair, although fairness is often debated politically.

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18
Q

Q: What are the differences between direct and indirect taxes?

A

A: Direct taxes (e.g., income tax, capital gains tax) are paid by income generators, while indirect taxes (e.g., VAT) are consumption-based.

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19
Q

Q: Explain the difference between progressive and regressive taxes.

A

A: Progressive taxes increase with income (higher rates for higher earners), whereas regressive taxes decrease as income rises (lower rates for higher earners).

20
Q

Q: What distinguishes unit taxes from value taxes?

A

A: Unit taxes are flat rates per item (e.g., beer duty), while value taxes are percentages of the total value (e.g., 20% VAT).

21
Q

Q: What is the debate surrounding the ability to pay versus the benefit principle in taxation?

A

A: It questions whether taxes should reflect the taxpayer’s ability to pay (e.g., income tax) or the benefits received (e.g., NHS funding).

22
Q

Q: Why is awareness of external influences important in taxation?

A

A: External factors like climate change and fluctuations in oil and food prices can significantly affect living costs and tax policies.

23
Q

Q: How do the UK’s tax treaties relate to international tax standards?

A

A: They often align with models established by the Organisation for Economic Cooperation and Development (OECD).

24
Q

Q: What is Income Tax (IT)?

A

A: Tax payable by individuals on earnings from self-employment and employment, collected through the PAYE system for employees.

25
Q

Q: What are National Insurance Contributions (NICs)?

A

A: Payments required from employed and self-employed individuals and by businesses for their employees.

26
Q

Q: What is Corporation Tax (CT)?

A

A: Tax charged on companies’ income and gains.

27
Q

Q: What is Capital Gains Tax (CGT)?

A

A: Tax applicable to individuals on the disposal of capital assets, including land, buildings, shares, and antiques.

28
Q

Q: What is Value Added Tax (VAT)?

A

A: A tax levied on most goods and services, paid by the final consumer.

29
Q

Q: What is the financial year for corporation tax in the UK?

A

A: Runs from 1 April to 31 March of the following year (e.g., FY23 is from 1 April 2023 to 31 March 2024).

30
Q

Q: What is the tax year for individuals in the UK?

A

A: Runs from 6 April to 5 April of the following year (e.g., the tax year 2023/24 is from 6 April 2023 to 5 April 2024).

31
Q

Q: What is Making Tax Digital for Businesses (MTDfB)?

A

A: An HMRC initiative to modernize tax record-keeping and reporting, requiring businesses to provide information digitally on a quarterly basis.

32
Q

Q: What is the current application of MTDfB?

A

A: It currently applies to VAT, but will eventually extend to all businesses, self-employed individuals, and landlords, with some exemptions.

33
Q

Q: What are the primary responsibilities of HMRC?

A

A: Collecting and administering IT, CGT, NIC, CT, and VAT; administering universal credit, tax credits, and child benefit; collecting student loan repayments; ensuring adherence to minimum wage rules; protecting against tax fraud and smuggling.

34
Q

Q: What powers does HMRC have to fulfill its responsibilities?

A

A: HMRC can issue an ‘information notice’ if a taxpayer does not fully cooperate with informal requests for information.

35
Q

Q: What are the two types of compliance checks HMRC can conduct?

A

A: Pre-return checks and enquiries into returns that have already been submitted.

36
Q

Q: What is the notice period for HMRC to notify a taxpayer about an enquiry?

A

A: 12 months after the actual filing date for timely returns; for late returns, by the quarter day following the 12-month anniversary.

37
Q

Q: What happens if a tax return is not received by the filing date?

A

A: HMRC can make a determination (estimate) of the tax due, which must be done within three years of the statutory filing date.

38
Q

Q: What is a discovery assessment?

A

A: A tax assessment raised by HMRC if it receives new information after the normal compliance check time limit has passed.

39
Q

Q: What are the time limits for raising a discovery assessment?

A

A:
• 4 years: No careless or deliberate
behavior.
• 6 years: Careless behavior.
• 20 years: Deliberate behavior.

40
Q

Q: What is the HMRC Payment Support Service (PSS)?

A

A: A service that assists individuals and businesses who cannot pay their taxes by the deadline, potentially offering a ‘time to pay’ arrangement.

41
Q

Q: What conditions must be met for HMRC to directly recover tax from a taxpayer’s bank account?

A

A: Amount due must be at least £1,000; taxpayer must be notified and allowed to object; at least £5,000 must remain in the account.

42
Q

Q: What can a taxpayer appeal against?

A

A: Information notices, requests for documentation, compliance check amendments, discovery assessments, VAT assessments, and penalties.

43
Q

Q: What is the procedure for filing an appeal against HMRC?

A

A: Appeals must be made in writing within 30 days, stating the grounds for the appeal.

44
Q

Q: What happens if a tax agent is found to have acted dishonestly?

A

A: HMRC can access the agent’s working papers, issue a conduct notice, and impose penalties ranging from £5,000 to £50,000.

45
Q

Q: What is the penalty for a tax agent who refuses to comply with a file access notice?

A

A: A penalty of £300, plus additional daily penalties of £60.

ACA Tax (10 decks)

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