topic 3 - uk taxation 1

Question 1

Tax legislation

Answer 1

• The main statute relating to taxation is the Income and Corporation Taxes Act 1988.
• Statutes – legislation passed by parliament
• Case law – established by the decisions made by judges in court cases
• Each year following delivery of the Budget, a Finance Bill is produces containing the governments taxation proposals. When the Bill is approved by Parliament and becomes a Finance At it becomes law.

Question 2

Residence

Answer 2

• Mainly affects income tax and CGT
• A person presents in the UK for at least 183 days in a given tax year
• A person who is resident and domiciled in the UK will be subject to UK income tax on their worldwide earned and unearned income.

Question 3

Reciprocal tax treaties

Answer 3

the UK makes with other countries, to ensure that individuals are not taxed in full twice on the same income or gains. For a UK resident any overseas tax that has been paid will be deducted from the UK tax liability.

Question 4

Domicile

Answer 4

• The country that an individual treats as their home. Acquired usually at birth but can change domicile by going to live in a different country intending to stay there permanently
• Persons not domiciled in the UK; tax is only due on assets in the UK
• People who are not UK domiciled but have been a resident in the UK for tax purposes in at least 15 out of 20 years are deemed UK domiciled for tax purposes.

Question 5

Capital gains tax

Answer 5

tax payable on the gain made when certain assets are disposed of usually by selling or gifting

Question 6

Income not assessable to tax

Answer 6

o Redundancy payments
o Interest on NS&I savings certificates
o Income from ISAs
o Gift aid payments
o Lottery prizes
o Wedding presents
o Any scholarship or other educational grant
o War widows’ pensions

Question 7

Personal allowance

Answer 7

(all UK residents from birth) the rate above which income tax is charged

Question 8

marriage allowance

Answer 8

possible for an individual to transfer part of their personal allowance to their spouse/civil partner

Question 9

A person who is UK resident for tax purposes only pays income tax on earnings generated in the UK. True or false?

Answer 9

false

Question 10

In what order of priority is income taxed?

Answer 10

• non-savings income
• Savings income
• Dividend income