Chapter 2 Definitions Flashcards
Direct taxes
Paid by those who generate the funds to pay the tax e.g income tax
Indirect taxes
Relate to consumption
Progressive taxes
Rise as a proportion of income as that income rises
Regressive taxes
Rise as a proportion of income as income falls
Unit taxes
Calculated as a flat rate per item, regardless of value
Value taxes
Based on a percentage of the value of the item
Capital taxes
A tax based on the value of capital assets or wealth, for example capital gains tax (CGT) or inheritance tax (IHT)
Transaction-based taxes
Taxes that are incurred due to a specific transaction taking place, for example stamp taxes on the purchase of land, buildings or shares
European union
The overall aim of the EU is the creation of a single European market with no internal trade barriers between member states and common policies relating to trade outside the EU
Organisation for Economic Co-operation and Development
The OECD’s model tax treaty forms the basis of many of the UK’s international tax treaties
Tax year
6 April in one calendar to 5 April in the next calendar year
Company
A company is a legal person formed by incorporation under the Companies Act. It is legally separate from its owners (shareholders) and its managers (directors)
Financial year
1 April in one calendar year to 31 March in the next calendar year
His Majesty’s Revenue & Customs
HMRC was established in 2005 as the UK’s tax and customs authority, responsible for making sure that money is available to fund the UK’s public services and for helping families and individuals with targeted financial support. Through its customs service, it facilitates legitimate trade and protects the UK’s economic, social and physical security
Making Tax Digital
MTDfB is a government run project that will fundamentally change the UK tax system by ending the use of tax return in its current form for many taxpayers. It will simplify maintenance of records and accuracy of tax liabilities for businesses and individuals. Under MTDfB, taxpayers will be required to maintain records digitally and make a quarterly return of data to HMRC, with a final adjusting return when figures are finalised. It only applies to VAT right now from April 2019
Budget cycle
The process by which UK statutory tax law is developed
Finance Act
They amend the tax law each year. This is based on proposals from the Government and presented by the Chancellor of Exchequer in the Budget. The Budget forms the basis of the Financial Bill which is presented to Parliament each year to enact the proposals and bring them into law. This process is complete once the Financial Bill receives the Royal Assent, becoming the Finance Act
