United KingdomTAXATION

Gevorg BeglaryanGor ShahbazyanMariam PetrosyanMarina Sedrakyan

YEREVAN 2015

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• GDP2014 – 2,853.357 billion

• Unemployment RateFeb. 2015 – 5.6%• Corporate Tax Rate – 21%• Personal Income Tax Rate – 45%• Sales Tax Rate – 20%• Social Security

– Companies – 13.8%– Employees – 12%

United Kingdom: Economic Overview

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Tax Bodies and Taxes

Central Government

Local Governments – Income Tax– National Insurance– Value Added Tax– Corporation Tax– Capital Gains Tax– Inheritance Tax– Stamp Duty– Excise Duty– Customs Duty– Insurance Premium Tax– Air Passenger Duty

– Council Tax– Domestic Rates in Northern

Ireland– Business Rates in England and

Wales– Business Rates in Scotland

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INCOME TAX

¿Payers? Residents and Non-residents¿Tax base?

Residents – Worldwide IncomeNon-Residents – Only UK Income

¿Payment Frequency? Quarterly¿Couples? Considered as one taxpayer¿Deadline? January 31¿Declaration? Filled once in 5 years

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INCOME TAX: Taxable income

You pay tax on:• Employment/self employment earned

money• Some state benefits• Most pensions: state pensions, company

and personal pensions and retirement annuities

• Interest on savings and pensioner bonds• Rental income(unless you’re a

live-in landlord and get £4,250 or less)• Benefits you get from your job• Income from a trust• Dividends from company shares

You don’t pay tax on:

• Income from tax-exempt accounts: ISAs (15,240)

• Some state benefits• Premium bond or National Lottery wins• The first £4,250 of the rent you get from

a lodger in your home

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INCOME TAXTax year 2015-2016

Income Range Normal Rates

Dividend Rates

Basic Rate Up to £31,785 20% 10%

Higher Rate £31,785 - £150,000

40% 32.5%

Additional Rate Over £150,001 45% 37.5%

Rates

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INCOME TAX: Personal allowancesTax year 2015-2016

Born between 6 April 1938 and 5 April 1948

2015-2016

£0 to £26,999 £10,500

£27,000 to £27,999 Between £10,500 and £10,000 and the allowance goes down by £1 for every £2 that your adjusted net income is over £27,000

£28,000 to £100,000 £10,000

Born before 6 April 1938 2015-2016

£0 to £27,699 £10,660

£27,700 to £27, 819 Between £10,660 and £10,000 and the allowance goes down by £1 for every £2 that your adjusted net income is over £27,700

£28,820 to £100,000 £10,600

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SELF ASSESMENT DEADLINE

Register for self assessment Register by 5 October 2015

Paper tax returns Midnight 31 October 2015

Online tax returns Midnight 31 January 2016

Pay the tax you owe Midnight 31 January 2016

INCOME TAXTax year 2015-2016

If your tax return is up to 3 months late you’ll pay fine of £100.

Deadlines and Penalties

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CORPORATE TAX

¿Payers? Residents and Non-residents¿Tax base?

Residents – Worldwide IncomeNon-Residents – Only UK Income

¿Payment Frequency? Annually¿Couples? Considered as one taxpayer¿Declaration? Filled once in 5 years

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The Corporation Profit Tax Rate is 20% since 1 April, 2015.Since April 1, 2014

CORPORATE TAXTax year 2015-2016

Profit Rate

Small Profit < £300,000 20%

Above £300,000 21%

Marginal Profit £300,000 to £1,500,000 Only before 1 April, 2015

Rates

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CORPORATE TAX: Deductions

• Revenue expenses – deductible• Interest and other financing costs – deductible• Accounting depreciation – non-deductible• Goodwill, intellectual property etc. – deductible 4%

Patented InventionsRP*FY%((MR-IPR)/MR)

RP – profits from patentFY – percentageMR – main rate of profit taxIPR – reduced rate of 10%

Financial Year Percentage

1 April 2013- 31 March 2014

60%

1 April 2014 –31 March 2015

70%

1 April 2015 –31 March 2016

80%

1 April 2016 –31 March 2017

90%

1 April 2017 – 100%

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Corporate Tax: Penalties

Type of failure Penalty range(unprompted)

Penalty range (prompted)

Careless 0%- 30% 15% - 30%

Deliberate but not concealed

20% - 70% 35% - 70%

Deliberate and concealed

30% - 100% 50% - 100%

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WITHHOLDING TAXES

Dividends are always paid gross.• Patent, copyright, royalties in UK => WHT=20%• Several types of royalties are not subject for WHT: film

royalties, equipment royalties• Interest payments => WHT=20%Exclusions: payments of interest• By UK company to UK resident company• That qualify for exemption under EU interest and Royalties

Directive• Paid to/by UK bank• “short” interests• That don’t arise in the UK

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¿Declaration? Quarterly

VALUE ADDED TAX

¿Payers? Businesses registered for VAT

¿Tax base? Taxable supplies

¿Payment Frequency? Every time a sales transaction takes place

¿Deadline? 1 calendar month and 7 days after the end of an accounting period

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• Any person (legal or individuals) is liable to register for VAT if the combined value of its taxable supplies in the UK exceeded the registration threshold of £82,000 in the preceding 12 months.

• Businesses making only zero rated supplies can request exemption from registration.

• Businesses with taxable turnover below the registration thresholds may apply to be registered on a voluntary basis.

• A business may deregister if the anticipated value of its taxable supplies in the next 12 months is less than the deregistration threshold of £80,000.

• Where a business is involved only in the making of exempt supplies, it’s not able to register for VAT and is thus not able to recover any input VAT incurred.

VALUE ADDED TAX

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VALUE ADDED TAX

¿Taxable Supplies? • Business Sales• Hiring or loaning goods to someone• Selling business assets• Commission• Business goods used for personal reasons

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VALUE ADDED TAX

Rates

Rate % of VAT What the rate applies to

Standard 20% Most goods and services

Reduced rate 5% Some goods and services, eg children’s car seats and home energy

Zero rate 0% Zero-rated goods and services, eg most food and children’s clothes

The standard rate of VAT increased to 20% on 4 January 2011 (from 17.5%).

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Surcharges and penalties

VALUE ADDED TAX

Defaults within 12 months

Surcharge if annual turnover is less than £150,000

Surcharge if annual turnover is £150,000 or more

2nd No surcharge 2% (no surcharge if this is less than £400)

3rd 2% (no surcharge if this is less than £400)

5% (no surcharge if this is less than £400)

4th 5% (no surcharge if this is less than £400)

10% or £30 (whichever is more)

5th 10% or £30 (whichever is more)

15% or £30 (whichever is more)

6 or more 15% or £30 (whichever is more)

15% or £30 (whichever is more)

HMRC can charge you a penalty of up to:

•100% of any tax under-stated or over-claimed

if you send a return that contains a careless or

deliberate inaccuracy

•30% of an assessment if HMRC sends you one

that’s too low and you don’t tell them it’s wrong

within 30 days

•£400 if you submit a paper VAT Return,

unless HMRC has told you you’re exempt from

submitting your return online.

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VALUE ADDED TAX

Exemptions1. Land

2. Insurance

3. Postal services

4. Betting, gaming and lotteries

5. Finance

6. Education

7. Health and welfare

8. Burial and cremation

9. Subscriptions to public interest bodies

1. Subscriptions to public interest bodies

2. Sports, sports competitions, phys. education

3. Works of art, etc.

4. Fund–raising events

5. Cultural services, etc.

6. Supplies of goods where input tax cannot be recovered

7. Investment gold

8. Supplies of services by groups involving cost sharing

INSURANCE PREMIUM TAX

¿Payers? • an insurer who receives or intends to receive taxable

insurance premiums;• someone who charges the insured an insurance related fee in

respect of a higher rate contract (a taxable intermediary).

¿Tax base? General insurance premiums

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¿Deadline? You need to tell HMRC within 30 days of forming the intention of receiving taxable premiums as the insurer.

¿Tax rate?• a standard rate 6%• a higher rate 20% - for travel insurance, mechanical/electrical

appliances insurance and some vehicle insurance

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INSURANCE PREMIUM TAX

¿When should you register? • You must be registered from the date you receive your first taxable

premium.• You need to tell HMRC within 30 days of forming the intention of

receiving taxable premiums as the insurerIf you fail to notify about a change in registration particulars, on time, you may be liable to a penalty of £250.

¿Exemptions? Long-term insurance Reinsurance Insurance for commercial ships and aircraft Insurance for commercial goods in international transit Premiums for risks located outside the UK

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NATIONAL INSURANCE

¿Payers? an employee earning above £155 a

week; self-employed and making a profit of

£5,965 or more a year¿Tax base? Gross earnings¿Payment Frequency? Annually ¿Couples? Considered one taxpayer¿Deadline? April 5-6¿Declaration? Filled once

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NATIONAL INSURANCE

National Insurance Classes

Class 1

Class 1A or 1B

Class 2

Class 3

Class4

Employees earning more than £155 a week and under State Pension age - they’re automatically deducted by your employer.Employers pay these directly on their employee’s expenses or benefits.Self-employed people - you don’t have to pay if you earn less than £5,965 a year (but you can choose to pay voluntary contributions).Voluntary contributions - you can pay them to fill or avoid gaps in your National Insurance record.

Self-employed people earning profits over £8,060 a year.

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NATIONAL INSURANCE

Rates

You’ll pay less if:• you’re in a contracted out workplace pension• you’re a married woman or widow with a valid ‘certificate

of election’• you’re deferring National Insurance because you’ve got

more than one job

Classes Rate for tax year 2015 to 2016

Class 1 £155 to £815 a week (£672 to £3,532 a month) and Over £815 a week (£3,532 a month)

Class 2 £2.80 a week (if your profits are £5,965 or more a year)

Class 4 9% on profits between £8,060 and £42,3852% on profits over £42,385

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Penalties

• 5% for not having paid the full amount within 30 days of the due date;

• an additional 5% penalty for not having paid the full amount within 6 months of the due date;

• a further 5% penalty for not having paid the full amount within 12 months of the due date.

NATIONAL INSURANCE

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CAPITAL GAINS TAX

¿Deadline? January 31

¿Payers? Residents and Non-residents

¿Payment Frequency? On event of selling

¿Couples?

If you are married or in a civil partnership and living together you can transfer assets to your husband, wife or civil partner without having to pay CGT.

¿Declaration? No declaration

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CAPITAL GAINS TAX

¿Tax base?

1. Most personal possessions worth £6,000 or more, apart from your car.

2. Property that isn’t your main home.3. Your main home if you’ve used it for business or it’s very

large.4. Most shares.5. Business assets.

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CAPITAL GAINS TAX

Allowances and Rates

Year 2014-15 2015-16

Allowance £11,000 £11,100

Rate18% or 28%,

depending on your tax band

18% or 28%, depending on your

tax band

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Capital gains tax: penalties

If you miss the deadline of October 31 (paper return) or January 31 (online return) late filling penalties will apply.

Length of delay Penalty due

Up to three months £100

3 months – 6 months

£10 per day – max £900 – plus the above

6 months – 12 months

Max {£300; 5% of tax due + all above}

12 months or more Max {£300; 5% of tax due+ all above}. In serious cases up to 100% of the tax can be due instead.

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Customs Duty

• Charged on imported goods produced outside EU if they’re above a certain value, unless the duty comes to less than £9.

The value includes:• The price paid for the goods• Postage, packaging and insuranceYou don’t pay Customs duty when travelling from EU and buying/sending goods for you personal use.If you travel from outside the EU, you should pay Customs duty on the exceeding amount of your duty-free allowance.

Type and value of goods Customs Duty

Anything under £390 No charge

Gifts worth £390 - £630 2.5%

Other goods above £630 The rate depends on the type of good

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Alcohol allowance• Beer – 16 litres• Wine (not sparkling) – 4 litres• Spirits and other liquors over 22

% alcohol – 1litre• Fortified wine (sherry) sparkling

wine and alcoholic drinks up to 22% alcohol-2litre

Tobacco Allowance• 200 cigarettes• 100 cigarillos• 50 cigars• 250g tobacco

Customs Duty: Allowances

There are more than 14,000 classifications and the duty rate is different based on the country where the good is coming from. The Average rates are 5% - 9%.

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Two main customs penalties

Customs Duty: Penalties

Customs Civil Penalties (CCPs)-may be imposed when traders have contravened customs rules and regulations that relate to customs duty, community export duty, community import duty, import VAT or duties of a preferential tariff country

The minimum penalty is £250 and the maximum penalty for further breaches is either £1,000, or £2,500 for more significant breaches

Customs Civil Evasion Penalties (CCEPs)-may be imposed when it can be established that a trader has dishonestly evaded the payment of an import duty, an export duty or import VAT

CCEPs are worked out as a percentage of the duty traders have evaded or sought to evade. The penalty is equal to the duty dishonestly evaded or sought to be evaded.

AIR PASSENGER DUTY

Payers

You need to register and pay Air Passenger Duty (APD) if you operate a fixed wing aircraft from any UK airport that:• weighs 5.7 tonnes or more• is fuelled by kerosene• carries passengers whether they’ve paid for the flight or

not

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Frequency

An annual accounting scheme is available, which lets you make just one return each year. To qualify for the scheme the annual total of APD your business is likely to pay must be £500,000 or less.

AIR PASSENGER DUTY

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Tax rate

Destination Bands and distance from London (miles)

Reduced rate: (for travel in the lowest class of travel available on the aircraft)

Standard rate: (for travel in any other class of travel)

Higher rate: (for travel in aircraft of 20 tonnes or more equipped to carry fewer than 19 passengers)

Band A (0 to 2,000 miles)

£13 £26 £78

Band B (over 2,000 miles)

£71 £142 £426

From April 1, 2015

Destination Bands and distance from London (miles)

Reduced rate: (for travel in the lowest class of travel available on the aircraft)

Standard rate: (for travel in any other class of travel)

Higher rate: (for travel in aircraft of 20 tonnes or more equipped to carry fewer than 19 passengers)

Band A (0 to 2,000 miles)

£13 £26 £78

Band B (over 2,000 miles)

£73 £146 £438

AIR PASSENGER DUTY

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Tax rateFrom April 1, 2016

AIR PASSENGER DUTY

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Exempt

• Flight crew• Children under the age of 12• Transit passengers• Emergency/ Public Service flights• NATO flights• flights which are intended to be of 60 minutes

duration or less  or etc.

AIR PASSENGER DUTY

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Penalties

Fixed penalty £250 chargeable for each offence

Geared penalty (1) 5% of duty involved in the offence or £250, whichever is greater

Geared penalty (2) This is a new penalty that for APD will apply to failure to give notice of liability to be registered and return or document inaccuracies. These penalties, which could be up to 100% of the duty due, depending on the circumstances of the case.

Daily penalty £20 per day for each day the offence continues. 

Can only be issued if a fixed or geared penalty has already been issued for the same offence.

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Annual Tax on Enveloped Dwellings (ATED)

Annual Tax on Enveloped Dwellings (ATED) is payable by companies that own UK residential property (a dwelling) valued above a certain amount.

ATED return is calculated if the property is

• is in the UK• was valued at more than £1 million• is owned completely or partly by a company, a

partnership

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Annual Tax on Enveloped Dwellings (ATED)

Chargeable amounts for chargeable period 1 April 2015 to 31 March 2016

Property value Annual chargeable amount 2015 to 2016

More than £1 million but not more than £2 million

£7,000

More than £2 million but not more than £5 million

£23,350

More than £5 million but not more than £10 million

£54,450

More than £10 million but not more than £20 million

£109,050

More than £20 million £218,200

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Annual Tax on Enveloped Dwellings (ATED)

Exempt• hotels• guest houses• boarding school accommodation• hospitals• student halls of residence• military accommodation• care homes• prisons• historic houses

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Annual Tax on Enveloped Dwellings (ATED)

Reliefs

• let to a third party on a commercial basis and isn’t occupied by anyone connected with the owner

• open to the public for at least 28 days a year • part of a property trading business and isn’t occupied by anyone

connected with the owner• for the use of employees of the company, for the company’s

commercial business and where the employee does not have an interest (directly or indirectly) in the company of more than 10%

• a farmhouse, if it is occupied by a qualifying farm worker who farms the associated farmland

• a dwelling acquired by a financial institution in the course of lending• owned by a provider of social housing

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Annual Tax on Enveloped Dwellings (ATED): Penalties

Late returns will be liable to a penalty of £100 per return. Further

penalties fall due for returns that are 6-12 months late (max {5% of tax

due, £300}). In addition, where the returns are more than 3 months late,

HMRC may choose to impose a daily penalty of £10 per day.

In case the payment is 12 months late, HMRC can also apply penalty of

30% of tax due for payments that contain “careless” errors.

Companies are also obliged to maintain adequate records until the end of

the period during which HMRC may enquire and failure to do so may result

in a penaly of up to £3000.

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Excise Duty

• When you buy excise duty taxed items in the UK the price already includes the tax amount.

• When travellers bring such goods to UK from EU Member country it is considered that the tax is already paid in the home country.

• When travellers bring such goods to UK from outside the EU country, they pay excise duty if they exceed the duty-free allowance

• If alcohol or tobacco products are sent to the UK Excise Duty is payable wholly.

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EXCISE DUTY: Rates

Strength Duty rate per l for each % of alcohol

General Beer Duty 18.74

1.2% - 2.8% 8.10 pence

2.8% - 7.5% 18.37 pence

> 7.5% 23.85 pence

Wine and made-wine of more than 22% strength is classified as spirit and the duty is £27.66. Excise Wine Duty is stated for strengths between 1.2% - 15% and the duty is £84.21 – £350.07. Payment of Cider Duty depends on the strength and whether it is sparkling or still. Hence, strengths vary from 1.2% - 8.5% and the rate per litre is 38.87 pence – 264.61 pence.

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Inheritance Tax

Rates

 Above threshold £ 325,000- 40% inheritance tax

36% if 10% and more of the estate is given for charity

Estates pay Inheritance Tax if the inheritance is valued more than the threshold £325,000.

• Usually the executor or the ‘administrator’ of the estate using the funds from the estate.

• Trustees are responsible for paying Inheritance Tax on trust: When assets are transferred into a trust; When someone dies and a trust is involved when sorting out their estate; when a trust reaches a 10 year anniversary of when it was set up.

Payers

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Who Pays inheritance Tax

Need To pay Income Tax on profit you later earn from your inheritance Capital Gains Tax if you later sell shares or a property you

inherited Inheritance Tax on a gift the person gave you in the 7

years before they died. Inheritance tax if your inheritance is put into a trust and

the trust can’t or doesn’t pay

You must pay Inheritance Tax by the end of the sixth month after the person died.

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Inheritance Tax: Penalties

IHT return is 6 months late – max {£300, 5% of tax due}12 months and more – max{£300, 70% of the tax due}

The 70% figure can be reduced to 20% if the return is duly made without prompting from HMRC.

If HMRC discovers inaccuracy first and writes to prompt a disclosure, the minimum penalty will be 15%.

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Inheritance Tax exemptions and reliefs

• Charities. gifts to charities, museums, universities or community amateur sports clubs.

Political parties. 2 members elected to the House of Commons or 1 member elected to the House of Commons and received at least 150,000 votes in a general election• Payment to live with living costs. Such as ex husband, child under 18 years

old or in full-time education, old age relative.• Small gifts up to £ 250Regular gift from the givers income. Christmas, birthday and wedding or civil partnership anniversary presents, life insurance policy premiums, regular payments into a savings account

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Inheritance Tax exemptions and reliefs

• Wedding gifts. There’s no Inheritance Tax on a gift that was a wedding gift worth up to:

£5,000 to a child £2,500 to a grandchild or great-grandchild £1,000 to anyone elseBusiness relief. Allows a business to be passed on as a going concern by reducing the Inheritance Tax on it by up to 100%.• Agricultural relief. Allows a working farm to be passed on as a going concern

without paying Inheritance Tax on it.Woodland relief. Allows the value of the timber (but not the land) exclude from your estate. Whoever inherits the woodland may have to pay Inheritance Tax when they sell the timber - unless it qualifies for Agricultural or Business Relief.If the woodland also qualifies for Agricultural Relief or Business Relief it won’t qualify for Woodland Relief.Heritage relief. Allows exempt inheritance taxi in case of owning something of historic or scientific interest such as building, lands and works of art.

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Stamp Duty Land Tax Rate

• You have to pay Stamp Duty Land Tax (SDLT) if you buy a property in the UK over a certain price.

• SDLT rate depends on:the purchase price of the propertywhether the property is residentialwhether the buyer is a corporate body It may also be due if you lease a property

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• Purchase Price of the property: Previously charged at a single rate for the entire price From 4 December 2014, at increasing rates for each

portion of the price• Residential Properties: nothing on the first £125,000 of the property price 2% on the next £125,000 5% on the next £675,000 10% on the next £575,000 12% on the rest (above £1.5 million)

Stamp Duty Land Tax Rate

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• Corporate bodies: SDLT is charged at 15% on residential properties costing more

than £500,000 bought by bodies like companies and collective investment schemes

Can be change in rates when the property is used for property rental business or property resale trade

Residential leases:• If your residential lease premium (purchase price) is more than

£125,000, you will pay 1% SDLT on the amount above the £125,000 threshold.

Stamp Duty Land Tax Rate

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Stamp Duty Land Tax

Penalty:

• within 3 months after the filing date the fixed penalty is £100• more than 3 months after the filing date the fixed penalty is £200

Don’t file within 12 months, pay taxed-based penalty plus fixed penaltyTax based penalty can be up to the full amount of the tax due on the return

• Reasonable excuse:• Event prevented filling return yourself• Event that prevented making arrangements for someone else

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THANK YOU!