Module 1 Flashcards
What is the main objective of the UK tax system?
Raise revenue to financial public expenditure
What is a budget deficit?
When government spending is more then tax collected
What is a budget surplus?
When tax collected is more than government spending
Aside from financing public spending, what else can taxes be used to do?
Redistribute income or wealth - Robin Hood
Economic growth and encouragement of certain sectors - tax cut, more money to spend
Encouraging certain behaviour - sugar tax, solar panels
What are the canons of taxation?
Equality- should be fair, linked to ability to pay
Certainty- understand the tax
Convenience- easy to pay
Efficiency- minimise costs, max revenue
Who set up the canons of taxation?
Adam Smith
18th century economist
What is progressive tax?
Rich pay higher %
E.g income tax
What is regressive tax?
Rich pay lower %, poor bit harder
E.g national insurance
What is proportional tax?
All pay the same
E.g VAT
What is the fiscal year?
6th April - 5th April
Individuals
What is the financial year?
1 April - 31 March
Companies
When is the annual budget announced? And when does it come into effect
November/December
The following April
Who delivers the budget each year?
Chancellor of the Exchequer
What does HMRC do?
Include:
National insurance contributions
Enforcement of minimum and national living wages
Collection of student loan repayments
Administration of tax credits and child benefit
What are the four operational groups of HMRC?
Personal tax
Benefits and credits
Business tax
Customer compliance
What is the Tax Self-Assessment System?
Taxpayer must calculate tax due themselves and submit the info to back up the figures
Expected to make prompt payment
What are the three key areas is the tax framework?
Assessment
Appeals
Enquiries
When should be self-assessment tax return be filed with HMRC?
31 October is a paper return is used
31 January if online
When is the online self-assessment tax return due?
31 January
When is the paper self-assessment tax return due?
31 October
When is the tax liability paid?
Same day it is filed
Must be by 31 Jan
What does PAYE stand for?
Pay As You Earn
Tax dealt with at source, e.g taken out of salary before given any money
What is an assessment for tax payable?
Issued if an element of income has been omitted
How long is the time limit for assessments for tax payable?
6 years from end of tax year
Where deliberate action led to it, time limit extended to 20 years
When can an appeal be made?
Within 30 days of the amendment or assessment
If the appeal can’t be settled what is it taken to?
Independent tax tribunal
- first tier tribunal
- upper tribunal
- court of appeal
- Supreme Court
^order of escalation
Can only appeal on
A point of law
Where will an appeal be heard in Scotland?
Court of session then to Supreme Court
Appeals lastly move t
Supreme Court
HMRC doesn’t need any grounds for an?
Enquiry
What is an aspect enquiry?
Investigating one particular area of a taxpayers return
What is a full enquiry?
Will look at all the information in a return
When must written notice of the intention to inquire be given by?
- the end of the period 12 months after the actual receipt of a return by HMRC for a return filed on time
- If filed after due filing date, the quarter day following the first anniversary of the actual filing date
When must the intention to enquire be given if a tax return was filed on time?
End of period 12 months after the actual receipt of the return
When must the intention to enquire be given if a tax return was filed late?
The quarter day following the first anniversary of the actual filing date
What are the quarter dates?
31 January
30 April
31 July
31 October
How to end an enquiry? Why enquiries selected?
By showing information to their satisfaction
Not possible to appeal against an enquiry
HMRC doesn’t have to justify the reason, can be random selection
How can an enquiry be settled?
Agreement between HMRC and taxpayer that an amendment will be made
If can’t be reached the appeals proceeds will follow
Tax penalties are?
In the rates papers
When is an action careless?
Must have reasonable belief that the information they are providing is accurate
Penalties are
Cumulative
How to bring penalties down?
Seen as being cooperative
Penalties are common besides which types of tax?
VAT
Stamp duty
What is the difference between Tax planning, avoidance and evasion
Tax planning is legal
Tax avoidance is legal but controversial?
Tax evasion is illegal
What does GAAR guidance state?
Taxation is not to be treated as a game where taxpayers can indulge in any ingenious scheme in order to eliminate or reduce their tax liability
What does DOTAS stand for?
Disclosure of Tax Avoidance Schemes
What does DOTAS rules mean?
HMRC receives notice of planning schemes
What is direct tax?9
Charged on income
What is indirect tax?
Charged on expenditure
