1. Unit 12: Taxation Chapter 8The tax practitionerand the UK tax environment Nguyen Hoang My Phuong menfuong@gmail.com Chau Hung College / BTEC - Edexcel http://chauhung.edu.vn

2. Unit 12: Taxation The taxInheritance practitioner tax The tax practitioner &Income and UK taxthe UK tax capital legislation environmentClassificationHM Revenue of income & Customs 3. The main sources of UK tax legislation The key reference sources for UK tax legislation The organisation of HM Revenue & Custom & its terms of reference including the appeals systemObjectives The appeals process The classification of income & the aggregation of income which is then subject to income tax The difference between income & capital profits/losses 4. Sources of tax law - 1 There is no single source of UK tax law The basic rules are laid down in Acts ofParliament but it is left to the courts to interpretthese Acts & to provide much of the detail of thetax system In addition, HMRC issues a variety of statements,notices & leaflet which explain how the law isimplemented in practice. These statements haveno legal backing but they explain the taxauthorities interpretation of the law & will beadhered to unless successfully challenged in thecourts 5. Sources of tax law - 2 Statute (i.e. Acts of Parliament). Statutes areamend each year by the annual Finance Actwhich is based upon the Budget proposals. Statutory Instruments is a document which islaid before Parliament & then automaticallybecomes law within a stated period unless anyobjections are raised to it Statute is interpreted & amplified by case law Statements made by the tax authoritiesproduced by HMRC 6. Her Majestys Revenue & Customs(HMRC) Responsible for the administration of the UK taxsystem Issues:a) Statement of practiceb) Extra-statutory concessionsc) Explanatory leafletsd) Business economic notese) Tax Bulletinf) Internal Guidance www.hmrc.gov.uk 7. Main taxes Tax Suffered bySource / Statute Capital Allowances Act 2001 (CAA 2001); Income Tax (Earnings andIndividualsPensions) Act 2003 (ITEPA 2003);Income taxPartnerships Income Tax (Trading and Other Income) Act 2005 (ITTOIA 2005); Income Tax Act 2007 (ITA 2007) Income and Corporation Tax Act 1988Corporation(ICTA 1988), Corporation Tax Act 2009CompaniesTax(CTA 2009) and subsequent Finance Acts, CAA 2001 as aboveIndividualsPartnerships Taxation of Chargeable Gains Act 1992Capital gains Companies (which (TCGA 1992) and subsequent Financetax pay tax on capital Actsgains in the form ofcorporation tax) 8. Tax yearIndividuals Companiestax year / fiscal year / year of assessment: the corporation tax financial year:from 6 April to the following 5 Aprilfrom 1 April to the following 31 March the tax year 2009/10the financial year FY2009 from 6 April 2009 to 5 April 2010from 1 April 2009 to 31 March 2010 The whole program includes the provisions of Finance Act 2009(based on the March 2009 Budget) 9. The organisation of HMRC TreasuryResponsible for the public finance in UK Managed byImposes and collects taxationChancellor of the Exchequer HMRCAdministrative function of collection of taxCommissioners for HMRC 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 organised Officers of Revenue & Carry out the routine work of HMRC,Customssuch as supervising the self-assessment system and agreeing tax liabilities; following up amounts of unpaid taxes, etc. 10. Appeals First Tier Tribunal deals with most casesTax Tribunal complex cases which either involve an important issue of tax or a large financial sum Upper Tribunal appeals against decisions of First Tier Tribunal 11. The classification of income 1 Classified according to the nature of the income Some income is received in full, with no tax deducted in advance (paid gross) example: gilt interest (interest paid on government securities) Other income is received after deduction of tax (called income taxed at source) example: dividends on UK shares (10%) 12. The classification of income 2Income from employment & pensionsProfits of trades, professions & vocationsMain types ofIncome from property lettingincomeSavings & investment income, including interest &dividendsMiscellaneous income 13. Income & capital gains/lossesIncome tax Capital gains taxcharged on income profit which charged on one-off capital profitsmight be expected to recur example: weekly wages / profitsexample: profit from selling afrom running a business painting owned for 20 years 14. Inheritance tax - 1 wealth left by an individual on deathInheritance taxgifts made by individuals in the seven years prior to (IHT) their death some other large lifetime transfers of wealth Note: IHT does not charge on the income/profit made by an individual butrather the amount of wealth given away by that person IHT applies for the amount transferred out of their estate, whether ondeath or in the period beforehand 15. Inheritance tax - 2 Rate of tax: Amount Rate Name of rate Tax free / nil325,0000% band On a cumulative basis over a 7-year period On death>325,000 40%Full rate Sometimes apply to large lifetime20% transfers of wealth and calculatedat the time of the gift 16. Inheritance tax - 3