CHAPTER 2 - Introduction to Taxation

Which of the following items is never a source of UK tax law?

A The annual Finance Act

B HMRC statements of practice

C Case law

D Statutory instruments

B HMRC statements of practice

Pauline used to earn £20,000 and paid £3,000 in income tax per annum. She has recently received a substantial pay rise and now earns £50,000. Her revised income tax is £10,000.

What is the principle on which this tax system is based?

A Progressive taxation

B Regressive taxation

A Progressive taxation

National insurance contributions are an example of:

C Direct taxation

D Indirect taxation

C Direct taxation

One argument proposed in debates about taxation, is that the cost of collecting tax should be low in relation to the tax raised.

The principle behind this argument is the:

A Ability to pay principle

B Efficiency principle

B Efficiency principle

VAT is an example of:

C Direct taxation

D Indirect taxation

D Indirect taxation

Wren is an individual who does not have a trade or business of any kind. Wren is an employee earning £30,000 per year and a shareholder in Firm Ltd. Wren has heard that the following taxes exist in the UK and is unsure which of them they pay personally:

(1) Capital gains tax

(2) Corporation tax

(3) Income tax

(4) National insurance contributions

(5) Value added tax

Which of the following options correctly identifies which taxes Wren could or does suffer personally?

1, 3, 4 and 5

John and Dana operate a VAT-registered partnership, employing a large number of staff.

Which of the following options correctly identifies which taxes the partners are jointly and severally liable for?

(1) Income tax on each partner's share of profits from the partnership

(2) Income tax of employees deducted under the Pay As You Earn (PAYE) system

(3) Employer and employee national insurance contributions payable in respect of their staff

(4) Capital gains tax on each partner's share of partnership gains

(5) VAT as a supplier of goods

A All of them

B (1), (2) and (3) only

C (2), (3) and (5) only

D (1), (2), (3) and (5) only

C (2), (3) and (5) only

Which of the following are functions carried out by HMRC?

(1) Collect and administer direct taxes

(2) Collect and administer indirect taxes

(3) Pay and administer child support payments

(4) Collect repayments of student loans

(5) Pay and administer the state pension

A (1) and (2) only

B (1), (2) and (3) only

C (1), (2) and (4) only

D (1), (2), (3) and (5) only

C (1), (2) and (4) only

Which of the following options is correct regarding case law, as determined by tax cases in court?

A Case law is purely for guidance when interpreting statutory law

B Case law applies for the 12 months following the date of the particular court case

C Case law can be superseded by further statutory legislation

D Case law sets a precedent meaning the law can never be changed

C Case law can be superseded by further statutory legislation

Which of the following options correctly describes a statutory instrument?

A Published by HMRC primarily for the guidance of its own staff

B Sets out HMRC's interpretation of tax legislation

C Provides a relaxation of the strict legal position of tax legislation

D Tax legislation, commonly in the form of Regulations, containing detailed provisions

D Tax legislation, commonly in the form of Regulations, containing detailed provisions

Which of the following would be classed as an external influence on UK taxation policy?

A The Paris Agreement

B The ability to pay principle

C Climate change levy

D Fuel duty

C Climate change levy

Social Justice Taxes:

• Direct and Indirect Taxes

• Progressive and Regressive Taxes

• Unit/Value Tax

• Income/Capital/Expenditure

Environmental Concern Taxes:

• Climate Change Levy on Businesses in proportion to energy consumption

• Landfill Tax to discourage the use of landfill sites for waste disposal and to encourage recycling

• Taxes on Motor vehicles based on Carbon emissions, such as cars provided to employees.

Income Tax

Income from Employment and income from a business which they operate as a sole trader or as a member of a partnership.

Capital Gains Tax

Capital Gains Tax on the disposal of capital assets owned by them as investments or used in their sole trade or partnership.

National Insurance Contributions

NICs as an employee, as a sole trader or partner, and as an employer.

Value Added Tax

VAT as a supplier of goods and services or as the final consumer of goods or services.

Responsibilities of HMRC are:

• Collect and Administer IT, CGT, NIC, CT, and VAT

• Pay and Administer universal credit, tax credits and child benefit

• Collect repayments of student loans

• Ensure all employers meet the minimum wage rule

• Protect UK society from tax fraud, alcohol, and tobacco smuggling.