Lecture 1 Flashcards
What are Direct taxes?
Direct taxes are things that are directly charged for example income, profits, gains and etc.
They are either deducted at the source or paid directly to the tax authorities.
What are Indirect Taxes?
Indirect Taxes are things that are indirectly taxed for example when someone spends money on products and services they are taxed on that through extra charges that were input into the price of the product.
What is the tax year?
Taxes are generally imposed by law for a year at a time (The Tax year)
What are Tax Rules?
Tax rules are the rules that individuals and businesses need to follow and they often change from one year to the next (So it is important to apply the correct tax year rules).
What are the Tax Years for individuals?
Tax year for individuals are from the 6th April to the following 5th April of the next year.
Tax year are also referred to as the (Examination Year) / (Fiscal Year) / (Years of Assessment)
What are the Tax Years for Companies/Businesses?
The Tax Years for Companies and Businesses are from the 1st April to 31st March.
The tax Years for companies and businesses are also referred to as (Financial Years) / (FY)
What is HM Revenue and Customs and what do they do?
HM Revenue and Customs (HMRC) is a a body of civil servants headed by the commissioners for Revenue and customs.
The main function and job of HMRC is to calculate and assess the taxpayer’s liability and ensure that the correct amount of tax is paid.
What is Self-Assessment for Individuals?
It is the system used to assess an individuals liability to income tax each year (by self-employer) and sent to the HMRC.
What is Tax return?
Tax return is a form of self assessment of ones own tax liability (their income, expenses, and other tax information) which is then sent out to HMRC to assess.
Must be filed and sent to HMRC by 31st of October or by 31st of January 2024 of the following year.
What is Record Keeping and who does it?
Record keeping is the process of recording and keeping taxes in things such as books for example.
Record keeping is normally done by taxpayers in order to keep and make correct tax returns and to justify the figures entered on the return.
A taxpayer who is in a business or who lets property must keep these records for five years (after 31st of January following the tax year).
What are enquiries and discovery assessments?
HMRC may enquire into a tax return if it is suspected that something is wrong with the information provided in the return. (HMRC may also randomly select individuals and businesses to assess).
If HMRC discovers that full disclosure has not been made on a tax return, they can raise a discovery assessment.
What is Tax Evasion?
Tax evasion is the act of dishonest behaviour such as concealing information which is considered tax evasion and is illegal.
What is Tax Avoidance?
When taxpayers organise their financial affairs in such a way that they minimise their tax burden which is considered legal.
What is General Anti-Abuse Rule (GAAR)?
It is when HMRC makes adjustments to a taxpayer’s tax liability in order to counterattack any abusive tax arrangements.
(Tax arrangements are abusive if they are not consistent with the principles of tax law and exploit loopholes in the law).
What is Making Tax Digital (MTD)?
Tax returns are to be replaced by online digital tax accounts which are pre-populated with information that is already held by HMRC.
(Self-employed taxpayers and landlords will be required to use MTD-compliant accounting software to record income and expenditure and will be required to update their digital tax accounts quarterly in the near future).
