Tax terms

Question 1

Impact of 1911 and 1949 Parliament Acts

Answer 1

• The Lords cannot amend Money Bills and they also don’t need to be passes by the Lords

Question 2

When is it likely that Labour’s tax measures would be announced and take place?

Answer 2

• Likely to hold their budget in November
• Next fiscal year but it is possible that proposed fiscal measures could tax place
• There is hope that Labour is aiming for a more measured approach with a period of consultation with stakeholders before introducing measures

Question 3

When is the next fiscal year?

Answer 3

• 1st April for Corporation Tax
• 6th April for Income Tax

Question 4

What work do tax lawyers do?

Answer 4

• Advise clients in the best way to mitigate their tax liability + potential tax liability (eg when buying or selling assets)
• Translate and implement complex tax legislation
• Advise on how to structure or advise a new company or organisation
• Avoid conflict and any penalties by the HMRC
• Most work is non-contentious

Question 5

Impact of Brexit

Answer 5

• The UK can set its tax policy as it sees fir (subject to OECD and the new EU-UK Trade and Cooperation Agreement)

Question 6

Freshfields case study

Answer 6

• Acting for the London Stock Exchange group in challenging the EU Commission’s state aid decision addressed to the UK regarding its CFC rules

Question 7

Key goal of taxes for Labour

Answer 7

• Emphasised the need for stability and certainty in the business tax environment
• Desire for UK to be internationally competitive

Question 8

What will corporation tax be capped at?

Answer 8

• 25% until the next parliament

Question 9

Stance on annual investment allowance

Answer 9

• Pledged to retain full expensing and the annual investment allowance

Question 10

Business rates stance

Answer 10

• Unspecified new system of business property taxation with the aim of levelling the playing fields between high street and online retailers

Question 11

Energy Profits Levy stance

Answer 11

• Increase the windfall tax by 3% (effective tax rate of 78%)

Question 12

Suggestion for carried interest

Answer 12

• Tax carried interest as income
• Potentially at the top marginal rate of 45%
• May have a negative impact as private equity managers will leave the UK for more favourable tax regimes

Question 13

Stance on income tax and national insurance contributions

Answer 13

• Ruled out increases and have insisted they should be lower

Question 14

Private school fees

Answer 14

• Should be subject to VAT
• Unclear if it will be applied retrospectively

Question 15

Non-dom policy

Answer 15

• Abolition of the preferential tax regime for UK non-dams
• Close loopholes in the government’s reforms including the concession under which only 50% of foreign income would be taxed in the first year of the new regime

Question 16

How much does Labour intend to raise annually and how?

Answer 16

• £5B by the end of next year by tackling tax avoidance ]
• Investment into HMRC resources, improve customers services +strengthen HMRC’s powers to enforce payment of tax in investigation cases

Question 17

Growing trends

Answer 17

• Tax authorities are increasingly bringing challenges based on the location of businesses’ staff (remote working common and expected to persist)
• Businesses with an internationally mobile workforce = may not be straightforward knowing where workers are located
• Transfer pricing (key area of investigation)
• Are people employees or self-employed (VAT consequences and employment tax)

Question 18

Intermediary

Answer 18

• A broker or agent who arranges or facilitates the supply of goods or services between two or more persons but does not include a person who supplies such goods or services on their own account

Question 19

VAT

Answer 19

• Value added tax
• A consumption tax on goods and services levied at each stage of the supply chain where value is added
• Based on consumption rather than income

Question 20

HMRC

Answer 20

• HM Revenue and Customs
• Collect money which pays for the UK’s public services
• Administer the tax system in the most efficient way

Question 21

Treasury vs HMRC

Answer 21

• Treasury leads on strategic tax policy and development
• HMRC leads on policy maintenance and implementation

Question 22

Carried interest

Answer 22

• share of profits earned by general partners of PE, VC and hedge funds
• Performance fee
• Based on their role rather than initial investment in the fund

Question 22

Corporate tax

Answer 22

• Taxes paid on a company’s taxable income (revenue minus expenses)
• Currently 25% (rose 19% from last year)

Question 23

Windfall tax

Answer 23

• Extended until March 2029
• A 35% levy imposed by a government in companies that have benefitted from something that are not responsible for (a windfall)
• Energy firm profits soared beaches of rising demand after Covid and Russian invasion
• Applies to profits made from extracting UK oil and gas

Question 24

Renumeration

Answer 24

• Total financial compensation that employers pay to employees
• Should avoid conflict of interest, encourage responsible business conduct, promote awareness etc

Question 25

Non-doms

Answer 25

• UK resident whose permanent home for tax purposes in outside the UK
• Only pays tax on the money they earn in the UK

Question 26

Structured carried interest

Answer 26

• Allocating the Fund managers a share in the Fund’s profits
• Usually a 20% share of profits once investors have received back an amount equal to their original investment plus additional ROI (known as the hurdle)

Question 27

National insurance

Answer 27

• Paid if you are over 16 and earn more than £242 a week
• For state pension, maternity allowance etc

Question 28

Non-profit tax

Answer 28

• Charities do not pay taxes on most types of income as long as they use the money for charitable purposes

Question 29

Global minimum corporate tax rate

Answer 29

• OECD plan to set minimum corporate tax rate at 15%
• Aims to reduce tax competition between countries and discourage multinational corporations from profit shifting that avoids taxes

Question 30

annual investment allowance

Answer 30

• Form of tax relief for British Businesses that is designated for the purchase of business equipment
• Deduct the full value of an item that qualifies from your profits before tax
• Up to £1M

Question 31

Capital gains tax

Answer 31

• Tax on the profit when you sell an asset that has increased in value
• 24% on residential property
• 28% if you manage an investment fund
• 20% on your gains from other chargeable assets

Question 32

Income Tax UK

Answer 32

• Personal allowance 0% (up to £12,570)
• Basic 20% (up to £50,270)
• Higher rate 40% (up to £125,140)
• Additional rate 45% (over £125,140)
• Tax that you pay on your income