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PTX > Introduction To Taxation > Flashcards

Introduction To Taxation Flashcards

1
Q

Where do the basic rules of the UK tax system come from?

A
  1. Tax legislation
  2. Case law
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2
Q

What updates tax legislation?

A

Finance Act

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3
Q

How often is tax legislation updated?

A

Annually (in the finance act)

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4
Q

Detailed notes on an area of tax

A

Statutory instruments

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5
Q

Efficiency principle

A

Cost of collection of tax should be less than the tax raised

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6
Q

HMRC

A

Controls and administers most UK tax

Doesn’t make the tax rules

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7
Q

Does HMRC issue further guidance to explain and interpret tax law?

A

Yes

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8
Q

Document providing HMRC’s interpretation of tax law and clarification/more detail on how it should be applied?

A

Statement of practise

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9
Q

What is given to specific taxpayers to relax the tax legislation?

E.g. undue hardship or anomalies

Technically illegal and being phased out

A

Extra-statutory concessions

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10
Q

HMRC’s internal working documents

Also made public

A

Internal guidance manuals

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11
Q

Sources of tax practice

A
  1. Statements of practice
  2. Extra-statutory concessions
  3. Internal guidance manuals
  4. HMRC website
  5. HMRC press releases
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12
Q

Objectives of tax

A
  1. Economic objectives
  2. Social justice
  3. External influences
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13
Q

Economic objectives of tax

A

Used to direct the behaviour of businesses and individuals

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14
Q

Neutrality principle

A

Tax shouldn’t distort choice

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15
Q

What does the current UK tax system encourage?

A

Individual saving
Charitable donations
Entrepreneurs + investors
Environmental actions

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16
Q

What does the current UK tax system discourage?

A

Driving petrol and diesel vehicles
Drinking alcohol
Unenvironmantal actions

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17
Q

Equity principle of tax

A

Tax should be fair and just

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18
Q

Fairness tax principles

A
  1. Direct/indirect principle
  2. Progressive/regressive principle
  3. Unit/Value principle
  4. Ability to pay/Benefit principle
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19
Q

Direct/Indirect principle

A

Direct v Indirect taxes

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20
Q

Direct taxes

A

Paid by those who generate funds

E.g. income, capital gains, corporation tax

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21
Q

Indirect taxes

A

Transaction based
Relate to consumption

E.g. VAT

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22
Q

Progressive/regressive principle

A

Progressive v regressive taxes

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23
Q

Progressive taxes

A

Increase with income

E.g. income tax

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24
Q

Regressive taxes

A

Decrease with income

E.g. NI

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25
Q

Unit/Value principle

A

Unit taxes v value taxes

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26
Q

Unit taxes

A

Flat rate per item, regardless of value

E.g. beer duty depends on strength not price

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27
Q

Value taxes

A

% of value of goods/services

E.g. VAT

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28
Q

Ability to pay principle

A

E.g. income tax

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29
Q

Benefit principle

A

E.g. NHS

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30
Q

Main external influences to UK tax

A

EU (Though not now we quit)

International tax treaties

Global concerns

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31
Q

What are most of the UK’s international tax treaties based on?

A

OECD model tax treaty

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32
Q

OECD

A

Organisation for economic cooperation and development

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33
Q

Examples of global concerns affecting tax

A

COVID

Climate change

34
Q

Types of UK tax (examinable at PTX)

A
  1. Income tax
  2. National insurance
  3. Corporation tax
  4. Capital gains tax
  5. Value added tax
35
Q

How is income tax collected?

A

PAYE

36
Q

What is IT paid on?

A

Earnings

Both employment and self-employment

37
Q

Who pays NI?

A
  1. All employed or self-employed individuals
  2. Businesses in relation to its employees
38
Q

CT

A

Paid by companies
On all income and gains

39
Q

Who pays CGT?

A

Individuals
On the disposal of capital assets

40
Q

Capital assets e.g.

A

Land
Buildings
Shares

Antiques

41
Q

Who pays VAT?

A

The final consumer

42
Q

What is the financial year?

A

1 April to 31 March

43
Q

What is the tax year?

A

6 April to 5 April

44
Q

In what year do corporations pay corporation tax?

A

Financial year

45
Q

In what year do individuals get taxed?

A

Tax year

46
Q

Who are individuals from a tax standpoint?

A

Employees
Sole traders
Partners

47
Q

How often will companies tell HMRC about their tax with MTDfB?

A

Quarterly

48
Q

When will MTD be phased in?

A

From 1 April 2019

49
Q

Who does MTDfB apply to at the moment?

A

Businesses
For VAT
Only over the annual registration limit

50
Q

What is the annual VAT registration limit since 1 April 2017?

A

£85,000

51
Q

Who will MTD apply to when finished?

A

All businesses
(Incorporated and unincorporated)

Self-employed

Landlords

52
Q

Will MTD have any exemptions when finished?

A

Yes
Limited

53
Q

HMRC responsibilities examples

A

Collecting and administering taxes
IT, CGT, NIC, CT, VAT

Paying & Administering
Universal credit, Tax credits, Child benefit

Collecting student loan repayments

Ensuring minimum wage adherence

Protecting society from:
Smuggling, Tax fraud, Illegal importation of drugs

54
Q

Does HMRC have various powers to help it meet its responsibilities?

A

Yes

E.g. ‘Information notice’

55
Q

2 types of compliance checks on tax returns

A
  1. Pre-return checks
  2. Already submitted returns enquiries
56
Q

When must HMRC give notice of the intention to conduct a tax return enquiry by?
If filed on time

A

12 months after the actual filing date

57
Q

When must HMRC give notice of the intention to conduct a tax return enquiry by?
If filed late

A

The ‘quarter day’ following the 12 month anniversary of the actual filing date

58
Q

What are the ‘quarter days’?

A

31 Jan
30 Apr
31 Jul
31 Oct

59
Q

What can HMRC do if the tax return isn’t received by the filing date?

A

Make a DETERMINATION (estimate) of the tax due
And treat this as the amount owed

60
Q

What is the deadline for making a tax determination?

A

3 years from the statutory filing date

61
Q

Is a determination displaced by the eventual calculation of the actual tax due?

A

Yes

62
Q

What can HMRC do if it finds info about a taxpayer’s tax affairs after the normal time limit for compliance checks has passed?

A

Discovery assessment

63
Q

Raising a discovery assessment time limit: No careless or deliberate behaviour

A

4 years

From end of relevant period

64
Q

Raising a discovery assessment time limit: For ‘careless behaviour’

A

6 years

From end of the relevant period

65
Q

Raising a discovery assessment time limit: For ‘deliberate behaviour’

A

20 years

From end of the relevant period

66
Q

Act of HMRC taking money directly from taxpayer’s bank account

A

Direct recovery

67
Q

Conditions that must be met for HMRC direct recovery?

A
  1. Issued notices to bank
    For taxpayer to not withdraw amount due
    For bank to pay HMRC
  2. At least £1,000
  3. Time to raise objection
  4. Taxpayer must be left with at least £5,000
    Over all their bank accounts
  5. HMRC satisfied that the taxpayer is aware the sum of due
68
Q

What can a taxpayer make an appeal against?

A
  1. Information notice
  2. Compliance check doc request
  3. Compliance check amendment
  4. HMRC right to raise discovery assessment
  5. Discovery assessment
  6. VAT assessment
  7. Imposition of penalty
69
Q

How must an HMRC appeal be made?

A

In writing

70
Q

HMRC appeal deadline?

A

30 days

71
Q

HMRC appeal must include?

A

The grounds for the appeal

72
Q

Will any tax due during an appeal have to be paid?

A

Yes

Unless postponed

73
Q

How are most HMRC appeals settled?

A

By agreement

74
Q

What happens if HMRC appeals aren’t settled by agreement?

A

Heard by the Tax Chamber of the First-tier Tribunal

75
Q

Individual who assists clients with their tax affairs

A

Tax Agent

76
Q

Dishonest conduct by tax agent definition

A

Tax agent acted dishonestly
Leading to loss of tax

77
Q

What can HMRC do if it has evidence of a tax agent’s dishonest conduct?

A
  1. Issue file access note
    To obtain their working papers
  2. Issue conduct notice
  3. Publish info about the tax agent
78
Q

Dishonest conduct by tax agents penalty

A

A fine

Between £5,000 to £50,000

79
Q

What does the severity of the penalty for a dishonest tax agent depend on?

A

The tax agent’s behaviour

80
Q

What are the penalties for a tax agent refusing to comply with a file access notice?

A

£300 fine

Additional daily penalties of £60

81
Q

Can a tax agent appeal a file access notice? (And late compliance I assume)

A

Yes

82
Q

What is the other consequence of a tax agent being found to be dishonest by HMRC?

A

They will be in breach of professional ethical guidelines

So disciplinary action by professional body, if a member of one

PTX (14 decks)

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