Definitions

Question 1

Money Laundering

Answer 1

A person is engaged in money laundering where they conceal, disguise, convert, transfer, remove criminal property or enter into in an arrangment which they know or suspect facilitates the acquisition, retention, use or control of criminal property.

Question 2

Criminal Property

Answer 2

Includes proceeds of tax evasion, benefits obtained through bribery and corruption etc.

Question 3

Tax Evasion

Answer 3

Illegally seeking to pay less tax than is due by deliberately misleading HMRC through the means of suppressing information or submitting false information

Question 4

Tax Avoidance

Answer 4

Any legal method to reduce an entity’s tax burder, for example utilising tax shelters such as ISAs

Question 5

Direct Taxes

Answer 5

Paid by those who generate funds e.g. income tax

Question 6

Indirect Taxes

Answer 6

Relate to consumption e.g. VAT

Question 7

Progressive Taxes

Answer 7

Increase with income

Question 8

Regressive Taxes

Answer 8

Decrease with income e.g. NIC falls as income rises

Question 9

Unit Taxes

Answer 9

Flat rate per item, regardless of value

Question 10

Value Taxes

Answer 10

Added to the percentage value of goods/services

Question 11

Income Taxes

Answer 11

Paid by those who generate income

Question 12

Capital Taxes

Answer 12

Paid on the disposal of capital assets e.g. capital gains tax

Question 13

Expenditure Taxes

Answer 13

Paid by those who incur expenditure e.g. VAT

Question 14

Ability to pay Principle

Answer 14

Tax should be based on ability to pay e.g. income tax

Question 15

Benefit Principle

Answer 15

Tax should be based on the benefit that taxpayer receives e.g. peopl should have the option to pay towards the NHS or take private health care

Question 16

Neutrality Principle

Answer 16

Tax should not distort choice

Question 17

Equity Principle

Answer 17

Tax should be fait and just

Question 18

Efficiency Principle

Answer 18

The cost of collection of tax should be less than the tax raised

Question 19

Income Tax

Answer 19

Payable by individuals on their earnings, both from self employment and employment

Question 20

NIC

Answer 20

Payable by all individuals who are either self employer or employed. Payable by business in relation to their employees

Question 21

Capital Gains Tax

Answer 21

Payable by individuals on the disposal of capital assets, payable on gains

Question 22

Corporation Tax

Answer 22

Payable by companies on all their income and gains

Question 23

Inheritence Tax

Answer 23

Payable on death, assets left in your will.

Question 24

VAT

Answer 24

Payable on most goods and services by the final consumer

Question 25

Stamp Duty Land Tax

Answer 25

Payable on purchase of land/buildings and shares respectively

Question 26

Net Income

Answer 26

Is the total of all income less reliefs but before deducting the PA

Question 27

Taxable income

Answer 27

Net income after the deduction of the tax free personal allowance.

Question 28

Personal Savings Allowance

Answer 28

Is available for tax payers with taxable income below £150,000 whose savings income is not covered by the Starting Rate Band. PSA is £1000 for those with taxable income up to £32,000; £500 for those with taxable income 150,0000 > x > 32,000

Question 29

Married Couples Allowance

Answer 29

Additional allowance if at least one spouse or civil partner was born before 6th April 1935

Question 30

Employment Income

Answer 30

Is money/money’s worth arising from employment!

Employment Income = Salary + Bonus + Benefits

Question 31

Trading Income

Answer 31

The profits of an unincorporated trader arising from a trade, profession or vocation

Question 32

Appropriation

Answer 32

Is a withdrawal of funds from a business’s profits. These are disallowable as expenses

Question 33

P60

Answer 33

Gross Pay + Tax Deducted + NICs paid by both employee and employer

Question 34

Trivial Benefits

Answer 34

Provided by employers to employees are exempt. Trivial = cost of providing the benefit is < £50
Trivial = is not cash or a cash voucher
Trivial = is not provided in recognition of services

Question 35

PAYE

Answer 35

Is the system used for collecting income tax and NIC from cash earnings. It is also used to record non-cash benefits, and under voluntary payrolling, to collect tax on such benefits.