Chapter 1: Introduction to Business Tax Flashcards
Fiscal Year - income tax
A tax year or year of assessment is a fiscal year.
6th Apr - 5th Apr
Sole traders and partnerships
Financial year - Corp Tax
A financial year which specifically relates to corp tax for a company runs from 1st Apr - 30th March
HMRC - Regulations and Guidance
responsible for Administration of UK tax
Statue Law - i.e Annual Finance Act. Each year changes to the finance act are proposed by the Chancellor of Exchequer (usually in the budget) and passed by Parliament
Case Law - Cases decided by the courts provide guidance on how legislation should be interpreted or applied. As tax is complicated there may be disagreements between HMRC and the tax payer
HMRC Guidance - HMRC publish wide range of guidance and explanatory notes. These assist in the interpretation and application of the tax laws
Tax practitioner
Act on behalf of an individual or a business as an agent for their client, responsibility to act in the best interests of their client,
and in an open and constructive manner with HMRC, consistent with the law
Money Laundering
Proceeds from criminal activity are converted into assets which appear to have no criminal connections
Tax practitioner to have controls and procedures by law in place to report suspicions of money laundering
Before taking on a client the tax practitioner should carry out a review and check identity
Errors - definition and preparing tax returns
a term intended to include all errors and omissions, whether the error has been made by the the client, tax practitioner, HMRC or anyone else
although tax return is prepared by the tax practitioner the responsibility ultimately lies with the tax payer, should be approved before submitted
If the Tax practitioner becomes aware of possible irregularities in the client’s tax affairs, the client should be informed as soon as he becomes aware of them
Errors - checklist
Establish Facts
-approach client for information to clarify
Advise client to disclose to HMRC
-agrees to disclose, advise them of potential consequences of failure to disclose
-does not agree, advise in writing of the consequences of failure to disclose
Client still does not agree
-Cease to act for client
-Inform HMRC that you have resigned, but not the reason
Consider a report to MLRO or NCA
Consider carefully responses to professional enquiries
Tax Avoidance
Legal way of minimising tax payers tax liability,
way government intended - legal and perfectly accepted way of reducing taxpayers tax liability. Taking advantage of reliefs and exemptions in the way the government intended
Government did not intend - Bending the rules of the tax system to gain a tax advantage that parliament never intended. Often involves contrived, artificial transactions that exploit loop holes in the law, with little or no purpose other than to produce tax advantage
Tax Evasion
Illegal
Breaking the law to reduce your tax bill
