The UK Tax system Flashcards
What are the 5 types of Taxes and who are they paid by?
Income tax, capital gains tax, inheritance tax (by individuals like you and I).
Corporation Tax (by companies).
VAT (by everybody).
What is a tax year?
It governs the tax rules and rates for a fixed 12 month period.
Are you informed of the Tax rules and rates after or before your earnings?
You are informed of the rules and rates in advance of the tax year during which you will earn your taxable income because the rules and rates will be valid for a fixed 12 month period as they keep on changing.
These tax rules and rates are announced by whom?
They are announced via the budget (the Finance Act) by the HMRC.
Name the department (treasury) that is responsible for the collection and implementation of tax in the UK.
the HMRC (His Majesty’s Revenue and Customs)
All the rules and rates that we’ll be learning for this exam will be from which finance act?
FA22 (Finance Act 22)
The tax year for 2022/2023 runs from when to when?
6 April 2022 - 5 April 2023.
What is direct taxation?
Taxes that are paid directly to the government, based on income and profit.
Give examples of direct taxation.
Income tax, corporation tax, inheritance tax, capital gains tax.
What is indirect taxation?
Taxes are collected via an intermediary (middleman) who then passes them on to the government.
Give examples of indirect taxation?
VAT, where the consumer pays VAT to a supplies trader (such as the cashier at a grocery store) who then pays it to the government.
The management of the treasury (HMRC) is the responsibility of whom?
The management of the treasury is the responsibility of the Chancellor of the Exchequer.
Who is the exchequer?
In British history, the Chancellor of the Exchequer is the government’s chief financial minister and is responsible for raising revenue through taxation or borrowing and for controlling public spending.
Who are the commissioners and what are their duties?
At the head of the HMRC are commissioners whose duties are:
1) to implement statue law
2) oversee the process of UK tax administration.
How is the main body of the HMRC divided?
It is divided into district offices and accounting and payment offices.
What are district offices (of the HMRC)?
The commissioner appoints officers of HMRC to implement the day to day work of HMRC.
What are the accounts and payments officers (of the HMRC)?
These concentrate on the collection and payment of tax.
Explain Tax legislation/statutes.
The government may issue statutory instruments which are detailed notes on an area of tax legislation.
Adherence is mandatory.
They are updated every year by the annual finance act.
What are case laws?
This refers to the decisions made in tax cases. The rulings in the courts are binding and so provide guidance on the interpretation of tax legislation.
Why is HMRC guidance issued?
It is issued due to the complexity of the legislation.
What does HMRC guidance include?
It includes the following:
1) Statements of practice.
2) Extra-statutory concessions.
3) Internal guidance manuals.
4) HMRC website, leaflets and booklets.
5) Detailed technical guidance/
Explain statements of practice. (HMRC guidance)
These provide HMRC interpretations of tax law and often provide clarification or detail of how it should be applied.
Explain extra-statutory concessions. (HMRC guidance)
Given to specific tax payers to relax the tax legislation. They are often given where undue hardships or anomalies (inconsistencies/infrequencies) would occur.
What do you mean by “relax the tax legislation)?
Relaxing tax legislation refers to making changes or adjustments to existing tax laws or regulations in a way that reduces their strictness or eases their impact on taxpayers. These changes can include reducing tax rates, expanding deductions, or introducing exemptions.
