Module 1 Introduction to Taxation

Question 1

What is the main objective of UK tax System?

Answer 1

To raise revenue to finance public expenditure

Question 2

What are the four canons of Taxation?

Answer 2

Equity (Equality) - Taxes should be fair, Tax liabilities should be linked to the ability to pay

Certainty - Taxpayers understands the tax they should be due to pay, when and how to pay.

Convenience - It should not cost taxpayers much to comply with tax rules

Efficiency (Economy) - Cost of collecting taxes should be minimised

Question 3

What are direct taxes?

Answer 3

Direct taxes are charged on income

Income tax
Corporation tax
Capital gains tax
Inheritance tax
Petroleum revenue tax

Question 4

What are indirect taxes?

Answer 4

Indirect taxes are charged on expenditure
Value Added Tax 
Stamp tax 
Insurance premium tax 
Airport Passenger Tax 
Soft drinks industry levy

Question 5

When does the Fiscal (Tax) Year run from?

Answer 5

6th of April to the 5th of April

2019/20 would be 6th of April 2019 to 5th of April 2020

Question 6

When the Finance bill becomes the Finance Act, it becomes legally binding? True or False?

Answer 6

True

Question 7

What is the board of HMRC comprised of?

Answer 7

Non Executive and Executive members (no direct political oversight, senior civil servants)

Question 8

HMRC Personnel are called what?

Answer 8

Officer of the Board

Question 9

What does the self assessment system of tax mean?

Answer 9

Taxpayers are responsible for working out their own tax liabilities, notifiying HMRC and paying the tax due by the relevant deadlines.

Question 10

The personal self-assessment tax return should be filed with HMRC by?

Answer 10

31st January after the end fo the fiscal year if the return is filed ONLINE - (31 January 2021 for 2019/20)

31 October after the end of the fiscal year if a PAPER return is used (31 October 2020 for 2019/20)

Question 11

What is the deadline for individual to pay their tax liability?

Answer 11

Tax liability must be paid by 31 January following the fiscal year (31 January 2021 for 2019/20) (difference between tax already suffered and tax due for year)

Question 12

HMRC may inssue an assessment for tax payable, why?

Answer 12

For when an element of income has been omitted.

Taxpayer careless - 6 years from the end of the tax year
Deliberate action - 20 years

Question 13

What can taxpayers appeal against under the self assessment system?

Answer 13

HMRC generated assessments
HMRC amendments to self assessments
Disallowance by HMRC of any claim made in a return

Question 14

What is the order of court for appeals?

Answer 14

The first order is appeal with HMRC, if this cannot be negotiated then the below court order:

1 - First Tier Tribunal
2 - Upper Tribunal (From this point on it examines on points of law)
3 - Scotland - Court of Session / England Wales - Court of Appeal
4 - Supreme Court

Question 15

What are the two types of enquiry HMRC can make?

Answer 15

Aspect Enquiry - Investigating one particular area

Full Enquiry - Full investigation

Question 16

Time limit for HMRC to open an enquiry?

Answer 16

12 months after the actual receipt of a return if it is filed ON TIME

If return was filed after due date, it is the quarter day following the first anniversary of the actual filing date (31 January, 30 April, 31 July, 31 October)

Cannot appeal against an enquiry notice but can appeal against request for information if it is perceived to be onerous.

Question 17

Is Tax Evasion / Tax Planning / Tax Avoidance legal?

Answer 17

Tax Evasion - Illegal and a criminal offence (minor cases are settled out of court, criminal prosecution for substantial amounts of lost revenue)
Tax Planning - Legal
Tax Avoidance - A grey area

Corporate body can be prosecuted and unlimited fined if an associated person (employee/agent) is guilty unless controls were in place.

Question 18

Why was sugar tax levy introduced?

Answer 18

The levy was introduced in 2018 and was earmarked to fund sport in primary schools to help with childhood obesity

Question 19

Who is responsible for setting the tax policy in UK?

Answer 19

HM Treasury is the government department which is responsible for setting tax legislation

Question 20

What does the HMRC do?

Answer 20

Responsible for administering the tax system and ensuring that the right amount of tax is collected each year

Question 21

Who needs to keep digital tax records?

Answer 21

Business and Landlords with annual turnover above the VAT registration threshold (currently £85,000)

Question 22

The upper tribunal will only hear cases from the first tier on points of law, what is the exception?

Answer 22

The exception is if the case is complex then they will hear it in first instance.

Question 23

The alternative dispute resolution programme is available to who?

Answer 23

Individuals and SMEs. The tribunal route remains open for use and taxpayer does not need to use the ADR process.

Question 24

What must be issued after an enquiry is completed (agreement reached)?

Answer 24

A closure notice by the HMRC

Question 25

Disclosure of Tax Avoidance Schemes (DOTAS)

Answer 25

Tax advisors are required to register with HMRC any tax avoidance schemes they promote to clients. (A reference number provided by HMRC must be quoted on their tax return or full details of the scheme should be provided)

Disclose is within 5 days