Taxation

NGUYN TH NHUNG Page 1
Task 1:
1.1, Describe tax environment in UK
UK Tax: The UK taxation system is composed of a number of different taxes, some
of which are direct taxes and some of which are indirect taxes:
Direct taxes are charged on income, profits or other gains and are either
deducted at source or paid directly to the tax authorities. The main direct
taxes which are payable by individuals are income tax, capital gains tax and
inheritance tax. The main direct tax payable by companies is corporation tax.
All of these taxes are administered by HM Revenue and Customs (HMRC),
which was formed in April 2005 when the Inland Revenue and HM Customs
and Excise were merged. National Insurance contributions, which can also be
looked upon as a form of direct taxation, are administered by the National
Insurance Contributions Office (NICO) of HMRC.
Indirect taxes are taxes on spending. They are charged when a taxpayer buys
an item and are paid to the vendor as part of the purchase price of the item. It
is then the vendor's duty to pass the tax on to the tax authorities. Indirect
taxes include value added tax (VAT), stamp duty, customs duties and the
excise duties levied on alcohol, tobacco and petrol. The only indirect tax
considered in this book is VAT, which is also administered by HM Revenue
and Customs.
(catalogue.pearsoned.co.uk/assets/.../Melville16.pdf)
A. Sources of tax law
There is no single source of UK tax law.
The basic rules are laid down in Acts of Parliament but it is left to the courts to
interpret these Acts & to provide much of the detail of the tax system.
In addition, HMRC issues a variety of statements, notices & leaflet which
explain how the law is implemented in practice. These statements have no
legal backing but they explain the tax authorities interpretation of the law &
will be adhered to unless successfully challenged in the courts.

Statute law: The basic rules of the UK tax system are embodied in a number
of tax statutes or Acts of Parliament. The main statutes currently in force for
each tax are as follow:
These statutes are amended each year by the annual Finance Act, which is
based upon the Budget proposals put forward by the Chancellor of the
Exchequer.
Some of the tax statutes provide for the making of detailed regulations by
statutory instrument.
A statutory instrument (SI) is a document which is laid before Parliament and
then automatically becomes law within a stated period unless any objections
are raised to it. Statute is interpreted & amplified by case law.
Statements made by the tax authorities produced by Her Majesty's Revenue
and Customs (HMRC).
Main tax
Tax Suffered by Source
Income tax
Individual
Partnerships
Income and Corporation Taxes Act
1988(ICTA).
Capital Allowances Acts 2001(CAA
2001). Income Tax (Earnings and
Pensions) Act 2003 (ITEPA 2003).
Income Tax (Trading and Other
Income) Act 2005 (ITTOIA 2005).
Income Tax Act 2007 (ITA 2007).
Corporation
tax
Companies
Income and Corporation Taxes Acts
1988 (ICTA 1988).
Tax of chargeable Gains Act
1992(TCGA 1992).
Capital Allowances Art 2001(CAA
2001).
Corporation Tax Act 2009 (CTA 2009).
Corporation Tax Act 2010 (CTA 2010


Capital gains
tax
Individual
Partnerships
Companies(which pay
tax on capital gains in the
form of corporation tax)
Taxation of Chargeable Gains Act
1992 (TCGA1992) and subsequent
Finance Acts.
National
Insurance

Social Security Contributions and
Benefits Act 1992(SSCBA 1992).

Inheritance
Tax

Inheritance Tax Act 1984(IHTA 1984)

Value added
tax

Value Added Tax Act 1994(VATA
1994)
Overseas
aspects of tax

Taxation (International and Other
Provisions) Act 2010 (TIOPA 2010).
Administration
of the tax
system

Taxes Management Act 1970 (TMA
1970).
Customs and Excise Management Act
1979 (CEMA 1979).
BPP Learning Media (2010) Taxation
Case law:
Case law assists us in interpreting the facts and coming to a conclusion as to
the nature of a particular contract. Over the years the courts have laid down a
number of tests, conditions or indicia which should be considered as a whole
in determining employment status. However, there is neither a single test nor
a magic formula for determining the nature of a contract.
It is the principle established by a court in a particular case that is important
as it may set a binding precedent. Even then the courts may restrict or widen
the application of a principle established in an earlier case.


One thing the courts have consistently stressed is that every case must be
decided on its own particular facts. (see Walls v Sinnett 60TC150 at
ESM7130 and Barnett v Brabyn at ESM7170). The courts have a habit of
distinguishing one case from another on the facts.
If the facts are on all fours with a decided case, then that may be a good
indicator of how the courts will decide but there is no certainty there. It is
recommended that you should.
ascertain the facts
interpret the facts using the principles established in reported cases
then form an opinion on the workers employment status.
(http://www.hmrc.gov.uk/manuals/esmmanual/ESM7009.htm)

Tax year:

www.slideshare.net/menfuong/phuong-taxation-chapt.

Individuals Companies
Tax year/ fiscal year/ year of
assessment : from 6 April to the
following 5 April
The corporation tax financial
year: from 1 April to the
following 31 March
The financial year FY2009 from
1 April 2009 to 31 March 2010
The tax year 2009/10 from 6
April 2009 to 5 April 2010
The whole program includes the provisions of Finance Act 2009
( based on the March 2009 budget)

HMRCs issues:
Statement of practice: A Statement of Practice (SP) sets out the HMRC
interpretation of tax legislation and clarifies the way in which the law will be
applied in practice. For example, SP 2/02 (the second SP issued in 2002)
deals with the taxation treatment of exchange rate fluctuations.
Extra-statutory concessions: An Extra - Statutory Concession (ESC) consists
of a relaxation which gives taxpayers a reduction in liability to which they are
not entitled under the strict letter of the law. In general, concessions are made
so as to resolve anomalies or relieve hardship. For example, ESC C5 is
concerned with the income of industrial and provident societies. A process of
giving statutory effect to certain ESCs is currently underway. This is being
done by means of statutory instruments.
Explanatory leaflets: These are aimed at the general public and explain the
tax system in non-technical language. For example, HMRC leaflet IR121 is a
guide to tax and national insurance contributions for those approaching
retirement.
Business economic notes: BENs were originally issued to Inspectors of Taxes
to assist them in examining accounts. They were intended to provide a
general background to the trade, with some explanation of its most important
features and not to provide an exhaustive or definitive picture of any particular
trade or profession.
Tax Bulletin: The content of Tax Bulletin gives the views of our technical
specialists on particular issues. The information published is reported
because it may be of interest to tax practitioners. Publication will be six times
a year, and include a cumulative index issued on an annual basis.
Internal Guidance: HMRC produces a comprehensive set of internal tax
manuals for the guidance of its own staff. These manuals may be inspected at
HMRC Enquiry Centers or accessed via the Internet.
http://www.hmrc.gov.uk/bens/
http://webarchive.nationalarchives.gov.uk/20110620155444/hmrc.gov.uk/bulle
tins/index.htm


B. Organization
HMRC: Her Majesty's Revenue and Customs is a non-ministerial department of the
British Government primarily responsible for the collection of taxes and the payment
of some forms of state support.
The organisation of HMRC

www.slideshare.net/menfuong/phuong-taxation-chapt.
BPP Learning Media (2010) Taxation

Treasury
Manage by chancellor
of the exchequer
Responsible for the public finance in
UK. Imposes and collects taxation
HMRC Administrative function of collection of
tax
Commissioners for
HMRC
Officers of Revenue
& Customs
Implement the law relating to direct &
indirect taxation.
Provide advice to the Chancellor of
the Exchequer on taxation matters.
Administer the many divisions &
offices into which HMRC is organized
Carry out the routine work of HMRC,
such as supervising the self
assessment system and agreeing tax
liabilities. Following up amounts of
unpaid taxes, etc

Structure of HM Revenue and Customs:
HM Revenue and Customs (HMRC) consists of a large body of civil servants
headed by the Commissioners for Revenue and Customs. The
Commissioners are appointed by the Queen in accordance with
recommendations made by the Treasury. This Government department is
managed by the Chancellor of the Exchequer and has overall responsibility
for the public finances of the UK. The main duties of the Commissioners for
Revenue and Customs are as follows:
to implement the law relating to direct and indirect taxation.
provide advice to the Chancellor of the Exchequer on taxation matters.
to administer the many divisions and offices into which HMRC is
organised.
The routine work of HMRC is carried out by officials known as Officers of
Revenue and Customs. With regard to direct taxation, the main function of
these officials is to calculate or "assess" a taxpayer's tax liability and then to
ensure that the correct amount of tax is paid. Under the Self- Assessment
system (see later in this chapter) a taxpayer may calculate his or her own tax
liability, in which case HMRC officials will check that the taxpayer's self-
assessment is correct.
At one time, tax assessment was the responsibility of Inspectors of Taxes
whilst tax collection was handled separately by Collectors of Taxes. However,
this separation of assessment and collection is now seen as out-dated and
the two functions have been combined. In consequence, the terms "Inspector"
and "Collector" have been dropped in favour of the above-mentioned "Officer
of Revenue and Customs".
HMRC has specialist offices which deal with such matters as pension
schemes, charities, trusts and so forth but most of the day-to-day work
relating to direct taxation takes place in local area offices. These local offices
are responsible for routine assessment and collection and for ensuring that
taxpayers comply with tax regulations. There is also a network of HMRC
Enquiry Centres. These provide a first point of contact for taxpayers with
general queries and carry stocks of tax forms and leaflets.

Tax tribunal:

www.slideshare.net/menfuong/phuong-taxation-chapt.\
Tax tribunal:
If you can't reach an agreement with HMRC, you can ask an independent
tribunal to decide the matter.
It's important to remember that if your appeal is related to direct tax, you or
your client must have made an appeal to HMRC before you can ask the
tribunal to consider it.
Generally your client will not have to pay for any appeal to be held, although
they should consider the cost of your time and that of any other advisers they
engage for the appeal.
All tax appeals are heard by a single, independent tribunal system, split into
two tiers - the Tax Chamber of the First-tier Tribunal and the Tax and
Chancery Chamber of the Upper Tribunal. The tribunals are administered by
the Ministry of Justice.
http://www.hmrc.gov.uk/agents/compliance/appeals.htm

Tax
Tribunal
Upper
Tribunal
First Tier
Tribunal
Deals with most cases
Complex cases which either
involve an important issue of
tax or a large financial sum
Appeals against decisions of
First Tier Tribunal

First Tier Tribunal
You can appeal to the First-tier Tribunal (Tax Chamber) if you disagree with a
tax decision made by HM Revenue & Customs (HMRC). The Tribunal is
independent of HMRC and is part of HM Courts and Tribunals Service
(HMCTS), an executive agency of the Ministry of Justice.
Appeals to the Tribunal are usually made if you have asked HMRC to review
a decision they have made and you are unhappy with the outcome. In some
circumstances HMRC can also appeal to the Tribunal if they cannot reach an
agreement with you.
The Tribunal covers all areas of business tax, such as VAT, Corporation Tax,
the Construction Industry Scheme and excise duty. It also covers all areas of
personal taxation relevant to business owners, including Income Tax, Capital
Gains Tax, PAYE (Pay As You Earn), National Insurance, maternity and
paternity pay and Inheritance Tax.
This guide outlines how to appeal to the First-tier Tribunal (Tax).
They Deals with most cases
This guide outlines how to appeal to the First-tier Tribunal (Tax).
When you can appeal to the First-tier Tribunal (Tax Chamber)
How to make an appeal to the First-tier Tribunal (Tax Chamber)
How appeals to the First-tier Tribunal are handled
What happens at a hearing at the First-tier Tribunal (Tax Chamber)
Timescales for an appeal to the First-tier Tribunal (Tax Chamber)
If you are unhappy with a First-tier Tribunal (Tax) decision


Upper Tribunal
If you disagree with a decision about tax made by the Tax Chamber of the
First-tier Tribunal, you may be able to appeal it. In this guide, 'First-tier
Tribunal' means the Tax Chamber of the First-tier Tribunal, and 'Upper
Tribunal' means the Tax and Chancery Chamber of the Upper Tribunal.
The Upper Tribunal deals with appeals against decisions in tax cases made
by the First-tier Tribunal.
Before you can appeal to the Upper Tribunal you must obtain permission to
appeal from the First-tier Tribunal.
This guide outlines how to make an appeal to the Upper Tribunal.
This guide outlines how to make an appeal to the Upper Tribunal.
When you can appeal against a tax decision of the First-tier Tribunal
Refusal of permission to appeal to the Upper Tribunal
The Upper Tribunal appeals process
The Upper Tribunal oral hearing
If you're unhappy with an Upper Tribunal decision
Deadlines for an appeal to the Upper Tribunal
Costs and the Upper Tribunal

1.2 Analyse the role and responsibilities of the tax practitioner

Tax services industry
Preparation: records and papers
relating to the procedure
Taxpayer
HMRC
Consulting: advice to firm how
to do best
Tax practitioners

The role of tax practitioner:
In addition to researching, preparing and reviewing tax returns for individuals and
corporations, tax professionals also prepare tax accruals for company financial
statements, conduct analyses of carry back losses and deductions, represent clients
audited by the IRS and resolve tax issues related to family estates, divorce
settlements and business acquisitions.
www.ehow.com
The right of tax practitioner:
Respect you: We recognise that you might be concerned about how we will deal with
you. We will:
Treat you with courtesy and consideration
Listen to your concerns
Answer your questions in a way you can understand
Try to understand your circumstances
Make you aware of your rights, including your right to appeal our decisions
Tell you how to exercise your right to appeal against our decisions

Help and support you to get things right: We want to give you as much certainty as
we can that you are paying or claiming the right amount. We will:
Provide information that helps you understand what you have to do and when
you have to do it
Provide information that clearly explains the taxes, duties, exemptions,
allowances, reliefs and tax credits that we are responsible for
Process the information you give us as quickly and accurately as we can
Put mistakes right as soon as we can.

Treat you as honest: We know that the great majority of people want to get things
right. Unless we have a good reason not to. We will:
Presume you are telling us the truth
Accept that you will pay what you owe and only claim what you are entitled to
Explain why we need to ask you questions and why we have decided to check
your records
Only question what you tell us if we have good reason to.


Treat you even-handedly: We will be even-handed in the way we deal with you. We
will take into account your circumstances and provide a consistent service. If you
need help we will also give you the appropriate support so you can meet your
obligations. We will:
Act within the law and our published guidance
Help you understand your legal rights
Explain what you can do if you disagree with our decisions or want to make a
complaint
Provide you with information in a way that meets your particular needs
Consider any financial difficulties you may be having.

Be professional and act with integrity: Whenever you deal with us we will take
responsibility for our actions and behave in a professional way. We will:
Act with integrity
Make sure that you are dealt with by people who have the right level of
expertise
Make decisions in accordance with the law and published guidance and
explain them clearly to you
Respond to your enquiries and resolve any problems as soon as we can
Let you know how appeals, investigations or complaints are progressing.

Tackle people who deliberately break the rules and challenge those who bend the
rules: The great majority of people are honest and get things right. We want to
protect them from the effects of people deliberately breaking the rules. We will also
challenge those who engage in avoidance, deliberately bending the rules. We will
treat genuine mistakes, acting without reasonable care and deliberately misleading
actions differently from each other. We will:
Identify people who are not paying what they owe or claiming more than they
should
Recover the money they owe and charge interest and penalties where
appropriate
Distinguish between legitimately trying to pay the lowest amount and bending
the rules through tax avoidance
Use our powers reasonably.

Protect your information and respect your privacy: We recognise we have privileged
access to your information. We will only ask you for information we need to do our
jobs. We will protect that information. We will:
Protect information we obtain, receive or hold about you
Explain why we need information, if you ask us to
Only allow our staff to see information when they need it to do their job
Give you the information we hold about you when you ask for it, as long as
the law lets us
Only share or release information about you when the law lets us and we
need to
Respect your legal rights when we visit premises.

Accept that someone else can represent you: You may want someone else to deal
with us on your behalf. To protect your privacy, we will only deal with them if they
have been authorised to represent you. We will:
Respect your representatives right to act for you and deal with them
appropriately
You should always check that your representative has the right experience
and knowledge to help you.
Do all we can to keep the cost of dealing with us as low as possible: We aim to take
up as little of your time and money as we can. We will:
Try to make our services straightforward and easy to access
Make it as cheap as we can for you to contact us
Explain clearly what we need from you
Do our best to give you complete, accurate and consistent advice
Do our best to get things right first time.
http://www.hmrc.gov.uk/charter/index.htm

Tax payers responsibility:
The taxpayer has primary responsibility to submit correct and complete returns to the
best of his knowledge and belief. It follows that the final decision as to whether to
disclose any issue is that of the client.
www.accaglobal.com/...members/.../Prof_conduct_tax...

Responsibility of the tax practitioner: (ethics)
A tax practitioner rendering professional tax services is entitled to put forward
the best position in favor of a client or employer, provided the service is
rendered with professional competence, does not in any way impair integrity
and objectivity, and is in the opinion of the tax practitioner consistent with the
law. Doubt may be resolved in favor of the client or the employer if there is
strong support for the position. A tax practitioner should not hold out to a client
or an employer the assurance that the tax return prepared or the tax advice
offered are beyond challenge. Instead, he or she should ensure that the client
or the employer is aware of the limitations attaching to tax advice and services
so that the client or employer does not misinterpret an expression of opinion
as an assertion of fact.
A tax practitioner who undertakes or assists in the preparation of a tax return
should advise the client or the employer that the responsibility for the content
of the return rests primarily with the client or the employee. The tax
practitioner should take the necessary steps to ensure that the tax return is
properly prepared based on the information received from the client or
employer.
Tax advice or opinions of material consequence given to a client or an
employer should be recorded, either in the form of a letter or in a
memorandum and properly filed.
A tax practitioner should not be associated with any return or communication
in which there is reason to believe that it:
Contains a false or misleading statement.
Contains statements or information furnished recklessly or without any
real knowledge of whether they are true or false.
Omits or obscures information required to be submitted and such
omission or obscurity would mislead the revenue authorities.


A tax practitioner may prepare tax returns involving the use of estimates if
such use is generally acceptable or of it is impractical under the
circumstances to obtain exact data. When estimates are used, they should be
presented as such in a manner so as to avoid the implication of greater
accuracy than exists. The tax practitioner should be satisfied that estimated
amounts are reasonable under the circumstances.
In preparing a tax return, a tax practitioner ordinarily may rely on information
furnished by the client or employer provided that the information appears
reasonable. Although the examination or review of documents or other
evidence in support of the information is not required, the professional
accountant should encourage, when appropriate, such supporting data to be
provided. In addition, the tax practitioner should:
Make use of the clients returns for prior years whenever feasible.
Make reasonable inquiries when the information presented appears to
be incorrect or incomplete.
Refer to the books and records of the business operations.
When a tax practitioner learns of a material error or omission in a tax return of
a prior year (with which he or she may or may not have been associated), or
of the failure to file a required tax return, the tax practitioner has a
responsibility to:
Promptly advise the client or employer of the error or omission and
recommend that disclosure be made to the revenue authorities.
If the tax practitioner is obliged by the Regulation of Tax Practitioners
Act to report the error or omission to the South African Revenue
Service (SARS) the tax practitioner must comply with such disclosure
requirements.

http://www.docstoc.com/docs/16068509/Duties-and-responsibilies-of-Tax-
Practitioners


Members responsibility
A member who prepares a return on behalf of a client is responsible to the client for
the accuracy of the return based on the information provided.
In dealing with HMRC in relation to a clients tax affairs a member should bear in
mind his duty of confidentiality to the client and that he is acting as the agent of his
client. He has a duty to act in the best interests of his client.
A member is not required, in his capacity as a tax practitioner, to audit the figures in
the books and records provided or verify information provided by a client or by a
third party. However a member must act in good faith in dealings with HMRC in
accordance with the fundamental principle of integrity. In particular the member must
take reasonable care when making statements or asserting facts on behalf of a
client. A member should not be associated with the presentation of facts he knows or
believes to be incorrect or misleading. 3.5 When a member is communicating with
HMRC, he should consider whether he needs to make it clear that he is relying on
information which has been supplied by the client or a third party.
www.accaglobal.com/...members/.../Prof_conduct_tax...

1.3 Explain the tax obligations of tax payers or their agents and the
implications of non-compliance
Tax obligations of tax payers:
Be honest: We need you to be honest with us. If someone else acts for you, we
expect them to be honest too. We expect you to:
Be truthful, open and act within the law
Give us accurate information
Give us all the relevant facts
Tell us as soon as you can if you think you have made a mistake.
Respect our staff: Our staff will respect you and we ask you to show them respect
too. If someone else acts for you, we expect the same respect from them. We expect
you to:
Be polite
Accept that we will not tolerate rude or abusive behaviour.

Take care to get things right: We need you to take responsibility for getting things
right, even if you have authorised someone to act on your behalf. We expect you to:
Take reasonable care when you complete tax returns and fill out forms
Send us tax returns and forms on time
Make payments on time
Respond in good time if we ask you to do something
Talk to us if there is anything that you are not sure about or if you are having
difficulty meeting your obligations
Tell us if you have any particular needs so we can take them into account
Tell us about any changes in your circumstances that will affect your
payments or claims
Keep adequate records that support what you tell us and hold them for as
long as the law says you need to.
http://www.hmrc.gov.uk/charter/index.htm
The implications of non-compliance:
Non-implication:
Violations are classified as:
Tax Offenses
Tax Crimes
Fouls Tax: These specify how the following penalties:
Tax evasion is not fraud
The delay
The failure of the formal duties of taxpayers, managers and others.
The failure of the formal duties of employees and tax administration officials
The failure of the formal duties of public officials outside the tax
administration, when it repeatedly commits the same offense is said that we
are dealing with a figure of recidivism
The subject of the tax obligation breached is responsible for the infringement,
the infringement is personal responsibility, except for some excision
established by law 11-92. The subject of tax obligations with the quality of
employers or employers, will be responsible for penalties applied to his

dependents from acting as such. The individual and other entities may be
liable for failure to tax penalties directly or indirectly, without having to
establish the responsibility of an individual
The liability is excluded according to the following:
The total inability, in the absence of a legal guardian or court.
The force majeure by accident.
excusable error regarding the fact that constitutes the tax crime.
The application of penalties for violation will be subject to payment of taxes to which
any, these can be:
Imprisonment
Surcharge interest and other penalties
Confiscation of material goods being infringed or used to commit them.
Closure of establishment
Disable the exercise of trades and professions
Loss of privileges, exemptions and incentives concessions
Cancellation of licenses, permits and registration in public registers.
Aggravating circumstances constitute violations:
Fouls:
The relapse and recurrence.
The official who provided the offender has
The level of schooling, and the accused had knowledge or should have
violated the statute.
The importance of tax losses and the characteristic of the offense
Behavior that assumes the offender, and the clarification of the facts
Degree of Guilt or willful wrongdoing in the case of tax violation
Crime: The tax crimes are the offenses for configuration requires the
existence of the elements of fraud (deceit) and guilt that is not susceptible of
excusable error. As crimes are: the damage, evasion and fraud.
Evasion: Also pecuniary, which are controlled by the courts. The taxpayer
committed fraud to simulate, hide and make a move or any other form of

deception, in order to induce the tax authorities, to err in the determination of
taxes, this crime may be intended to provide partial or total avoidance .
Taxpayers who commit these crimes are those which have the following
practices:
Development of excise goods without obtaining permits required.
Prepared with permission, but with teams that tax administration
unknown or whose modification has been made without your
authorization
Production of raw materials other than the authorized
Development, or marketing products that have illegally paid taxes
instead
Altering, destroying or tampering with products or features, or effects,
and its concealment, abuse retirement, reassignment or false indication
of origin and more offense constituting those crimes.
In addition, the taxpayers who commit such crimes are subject to pay the
following penalties, RD 5,000.00 to RD $ 200,000.00 imprisonment of six (6)
days or two years or both at once, when in the opinion of the judge the
seriousness of case requires. RD also fined $ 6,176.00 to RD $ 247,035.00 or
imprisonment of six (6) days or both at once, without prejudice to the penalties
of confiscation of goods and vehicles product and the closure of the premises
or establishment of a term not exceeding two months.
Incurred in the tax evasion through action or omission that could result in
decreased tax revenues illegitimate, the orthogonal exemptions abuse or
harm the perpetrator of the tax liability, taxpayers who pay after the deadline
incur no offense but this arrears.
Constitute evasion case include:
The submission of a false or inaccurate.
The total or partial default of payment of tax by the taxpayer or
responsible.
http://www.centrorisorse.org/rights-and-obligations-of-taxpayers-to-the-tax-
administration.html


Task 4
4.1 Identify chargeable assets and disposals for Mr. Smith
Chargeable assets:
All forms of property, wherever in the world they are situated, are chargeable
assets unless they are specifically designated as exempt.
Exempt assets:
Motor vehicles suitable for private use
National Savings and Investments certificates and premium bonds
Foreign currency for private use
Decorations for bravery where awarded, not purchased
Damage for personal or professional injury
Gilt- edged securities (treasury stock)
Qualifying corporate bonds (QCBs)
Certain chattels
Debts (except debts on a security)
Investments held in individual savings accounts
Chargeable disposals:
The following are chargeable disposals.
Sales of assets or parts of assets
Gifts of assets or parts of assets
The loss or destruction of assets
A chargeable disposal occurs on the date of the contract (where there is one,
whether written or oral), or the date of a conditional contract becoming
unconditional. This may differ from the date of transfer of the asset.
However, when a capital sum is received for example on the loss or
destruction of an asset, the disposal takes place on the day the sum is
received.
Where a disposal involves an acquisition by someone else, the date of
acquisition for that person is the same as the date of disposal.
Transfers of assets on death are exempt disposals
(BPP Learning Media (2010) Research Project (2
nd
edi): Lon Don: BPP House.)


Application into case:
According the theory in the Taxation textbook that I have been learned about
Chargeable assets, Chargeable disposals and Exempt assets. Based on the
taxation system of the UK in 2009. I think that in this case, the scenario has
given us see that: Mr. Smith has two types of asset are Treasury stocks and
Land. However, under the tax of England, in two type of assets above, Mr.
Smith just taxed on the plot of land. Meanwhile, Mr. Smith not be taxed on the
Treasury stocks asset. Because, follow the law tax of UK in 2009, Mr. Smith
will be exempt taxes that he must submit for individual tax year .

4.2 Calculate the capital gains and losses for Mr. Smith
Capital losses
Allowable losses of the same year
Allowable capital losses arising in a tax year are deducted from gains
arising in the same tax year.
Any loss which cannot be set off is carried forward to set against
futures gains. Losses must be used as soon as possible.
Allowable losses brought forward
Allowable losses brought forward are only set off to reduce current year gains
less current year allowable losses to the annual exempt amount.
NO set-off is made if net chargeable gains for the current year do not exceed
the annual exempt amount.

(BPP Learning Media (2010) Research Project (2
nd
edi): Lon Don: BPP House.)
Application into case:

Cost =

= cost x


The amount of the indexed cost attributable to the part sold is
250,000 = 100,000

Proceeds 140,000
Less: disposal cost (5,000)
Net proceed of sale 135,000
Less: cost (see above) (100,000)
Gains 35,000

4.3 Calculate capital gains tax payable of Mr. Smith
Capital gains tax
is a tax on the gain or profit you make when you sell, give away or otherwise
dispose of something.
It applies to assets that you own, such as shares or property. There's a tax-
free allowance and some additional reliefs that may reduce your Capital Gains
Tax bill.
Sometimes you may have no tax to pay.
http://www.hmrc.gov.uk/cgt/intro/basics.htm

From the gains that I have calculate above, I continuous calculate the Capital Gains
Tax:
Gains 35,000
Less: annual exemption (10,100)
Taxable gains 24,900
CGT( capital gains tax) @ 18% on 24,900 4,482

Task 2:

2.1 Calculate relevant income, expenses and allowances
Employment with Rose Restaurant
Salary 28,500
Accommodation benefits
Annual value Exempt (related job)
Ancillary services
Electricity 650
Gas 500
Cleaning 300
Maintenance 2,000
3,450 >28,500(10%)
Restricted to 10% of (28,728) 2,850
Less employment income (600)
2,250

car
Round CO
2
emission figure down to the nearest 5. ie: 180 g/km
Amount by which CO
2
emission exceed the baseline:
180 135 =45
Divided by: 45 : 5 = 9
Taxable percentage = 15% 9% = 24%
Car benefit 17,000 24%

4,080
Fuel benefit 16,900 24% 4,056
8,136
Less contribution towards use of car 1,136
7,000


2.2 Calculate taxable amounts and tax payable for employed and self-
employed individuals and advise on payment dates .

Non
savings

Savings

Dividend

Total

Salary 28,500
Accommodation 2,250
Car & Fuel benefit 7,000
Self employment 10,000
Dividends 2,700 100/90 3,000
Building society interest3,200100/80 4,000
Gilt interest 2,000
Premium bond prize( exempt)
Net income 37,750 6,000 3,000 9,000
Less personal allowance ( 41years old) (6,475)
Taxable income 31,275 6,000 3,000 40,275

For self employment: we will calculated tax on self employment separately.
Therefore, we do not plus 10,000 of self employment into net income.


Tax on non savings
Employment (31,275 20%) 6,255
Self employment
(6,125 20%) 1,225
(3,875 40%) 1,550
Tax on savings
(6,000 40%) 2,400
Tax on dividend:
(3,000 32.5%) 975
Tax liabilities 12,405
Less: Tax suffered
PAYE (4,000)
Building society interest (800)
Divided (300)
Tax payable 7,305

Payment dates:

Final payment = Tax payable tax liability capital gains tax
4,787 = 7,305 7,000 4,482
1
st
2
nd
Final payment

3,50
0

3,50
0

4,78
7

Tax year
5/4/11
Final
Payment
4,787

2
nd

Payment
3,500

5/4/10
6/4/09 6/4/08
1
st

Payment
3,500
Tax liability
2008/09
7,000

31/1/10 31/7/10
31/1/11

2.3 Advise the latest filing date for his personal tax return for 2009/10 if the
return is (a) non-electronic; (b) electronic. Given that the notice to file tax
return issued by HMRC on 6 April 2010

Note: It is assumed that not focusing much on National Insurance contributions.

Mr Charles Smith Notice to file tax return issued by HMRC on 6 April 2010

Non-electronic Electronic
Mr Charles Smith 31 October 2010 31 January 2011

5/4/10
6/4/09
Year 1
6/4/10
31/7/10 31/10/10
31/10/10
31/1/11
Non- electronic
Electronic
Mr. Smith

Task 3:
3.1 Calculate chargeable profits for New Times Ltd

Tax year
income?

6 Months

1/4/09 31/3/10 30/9/10

The 18 month period of account is divided into:
Year ending 31 March 2010
6 month to 30 September 2010
Result are allocated Y/e 6m to
31.3.10 30.9.10

Trading profit 12:6 180,000 90,000
Less: Carry forward trading loss of 15,000 (15,000)
165,000 90,000
Property Income
12 700 8,400
6 700 4,200
Capital gain( 1.11.09) 250,000
Less: gift aid donation(31.3.10) (35,000)
PCTCT(profit chargeable to corporation tax) 388,400 94,200

3.2 Explain how income tax deductions are to be dealt with of New Times Ltd
According to the scenario has given: New Times Ltd Company had a trading loss of
15,000 from the previous forward carried accounting period. Besides, New Times
Ltd Company had a gift aid donation is 35,000. In my opinion, thank to two factors
that have been carry forward loss relief are Trading loss and Gift aid donation=>
reduce taxable profits => This will help New Times Ltd Company reduce the levels
taxable income that Company must pay in this tax year of New Times Ltd Company.


3.3 Calculate the tax liabilities of New Times Ltd and due payment dates
Tax liabilities of New Times Ltd:

300,000 1,500,000

Small company
21% (FY 2008, 09)
20% (FY 2007)
Marginal relief

Full rate
28% (FY 2008, 09)
30% (FY 2007)

We first calculate the corporation tax at the full rate and then deduct:
(M P)
Marginal relief fraction

where
M = upper limit (currently 1,500,000)
P = profits
I = PCTCT
The marginal relief fraction is 7/400 for FY2009 and FY2008 (1/40 FY2007)

PCTCT(profit chargeable to corporation tax) 388,400
Dividend plus tax credit (27,000 100/90) 30,000
Profit(1,500,000 > 418,400 > 300,000) 418,400

Corporation tax on PCTCT(full tax) 388,400 28% 108,752
Less small companies marginal relief
(1,500,000 418,400)

(17,571)
91,181


Due payment dates:
As we can see, New Times Ltd has profit under 1,500,000 and over 300,000 (
(1,500,000 > 418,400 > 300,000). So, New Times Ltd Company is a company
has small size and medium. Therefore, payment dates of New Times Ltd Company
is nine months and one day after the end of the accounting period. The accounting
period of New Times Ltd Company ending on 31/1/09. So, The corporation tax for
the period is payable on 1/1/11.
Tax year 9 Months

1/4/08 31/3/09 31/12/10 1/1/11

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