Module 1 Introduction to Taxation Flashcards
What is the main objective of UK tax System?
To raise revenue to finance public expenditure
What are the four canons of Taxation?
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
What are direct taxes?
Direct taxes are charged on income
Income tax Corporation tax Capital gains tax Inheritance tax Petroleum revenue tax
What are indirect taxes?
Indirect taxes are charged on expenditure Value Added Tax Stamp tax Insurance premium tax Airport Passenger Tax Soft drinks industry levy
When does the Fiscal (Tax) Year run from?
6th of April to the 5th of April
2019/20 would be 6th of April 2019 to 5th of April 2020
When the Finance bill becomes the Finance Act, it becomes legally binding? True or False?
True
What is the board of HMRC comprised of?
Non Executive and Executive members (no direct political oversight, senior civil servants)
HMRC Personnel are called what?
Officer of the Board
What does the self assessment system of tax mean?
Taxpayers are responsible for working out their own tax liabilities, notifiying HMRC and paying the tax due by the relevant deadlines.
The personal self-assessment tax return should be filed with HMRC by?
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)
What is the deadline for individual to pay their tax liability?
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)
HMRC may inssue an assessment for tax payable, why?
For when an element of income has been omitted.
Taxpayer careless - 6 years from the end of the tax year
Deliberate action - 20 years
What can taxpayers appeal against under the self assessment system?
HMRC generated assessments
HMRC amendments to self assessments
Disallowance by HMRC of any claim made in a return
What is the order of court for appeals?
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
What are the two types of enquiry HMRC can make?
Aspect Enquiry - Investigating one particular area
Full Enquiry - Full investigation
Time limit for HMRC to open an enquiry?
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.
Is Tax Evasion / Tax Planning / Tax Avoidance legal?
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.
Why was sugar tax levy introduced?
The levy was introduced in 2018 and was earmarked to fund sport in primary schools to help with childhood obesity
Who is responsible for setting the tax policy in UK?
HM Treasury is the government department which is responsible for setting tax legislation
What does the HMRC do?
Responsible for administering the tax system and ensuring that the right amount of tax is collected each year
Who needs to keep digital tax records?
Business and Landlords with annual turnover above the VAT registration threshold (currently £85,000)
The upper tribunal will only hear cases from the first tier on points of law, what is the exception?
The exception is if the case is complex then they will hear it in first instance.
The alternative dispute resolution programme is available to who?
Individuals and SMEs. The tribunal route remains open for use and taxpayer does not need to use the ADR process.
What must be issued after an enquiry is completed (agreement reached)?
A closure notice by the HMRC
Disclosure of Tax Avoidance Schemes (DOTAS)
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
