Introduction to Taxation Flashcards
What does the government encourage with taxes?
Savings
Donations
Investments into business
Building own businesses
Environmental and social responsibilities
What does the government discourage with taxes?
Smoking and alcohol
Motoring (fuel)
What are the taxation principles for social justice?
Direct/indirect
Progressive/regressive
Unit/value
Income/capital/expenditure
Ability to pay/benefit
Neutrality
Equity
Efficiency
What is the direct/indirect principle?
Direct taxes - income, capital gains, corporation, national insurance - only paid by those who generate funds
Indirect taxes - VAT, excise duty, stamp duty - relate to consumption
What is the progressive/regressive principle?
Progressive - taxes rise as a proportion of income as that income rises
Regressive - taxes rise as a proportion of income as income falls
What is the unit/value principle?
Unit tax - flat rate per item, regardless of value
Value tax - percentage of value of item
What is the income/capital/expenditure principle?
Income tax - paid for by those generating income
Capital taxes - arise when capital assets are disposed or sold
Expenditure - transaction based taxes
What is the ability to pay/benefit principle?
Taxes should be based on ability of taxpayer to pay them and benefit taxpayer receives
What is the neutrality principle?
Tax should be neutral so as to not distort choice
What is the equity principle?
Tax should be equitable or just
What is the efficiency principle?
Cost of collecting tax should be low in relation to tax raised
What are the environmental taxes?
Climate change levy
Landfill tax
Motor vehicle tax
What are devolved taxes?
Devolution of legislative powers away from Westminster in favour of Welsh and Scottish gov operating different tax systems
What taxes are individuals liable to?
Income tax
Capital gains tax
National insurance contributions
VAT
When is the tax year?
6 April one year to 5 April to next
What taxes are partners joint and severally liable for?
Income tax of employees under PAYE
National insurance contributions as employer
VAT
What taxes are a company liable for?
Corporation tax on income and gains
Income tax of employees under PAYE
NICs
VAT
When is the financial year?
1 April to 31 March
How is corporation tax determined?
Reference to financial year
What are the responsibilities of HMRC?
Collect and administer IT, CGT, CT, VAT
Pay and administer universal credit, tax credit and child benefit
Repayments of student loans
Ensure employers meet minimum wage rules
Protect UK society from tax fraud, smuggling and illegal drugs
What is MTDfB?
Making tax digital for businesses
Digital tax returns for VAT
From April 2026 MTD for income tax will apply to those trading or property income over £50,000
What legislation is there for tax?
Finance Act based on proposals from Gov.
Budget forms basis of finance bill
What is included in HMRC publications?
Manuals
Statements of practice
Extra-statutory concessions
Press releases and explanatory notes
Leaflets
