Wk1 notes - Intro to UK Tax

Pass Requirement: 50% in this module leads to ACCA exemption from F6 (Taxation).
Preparation: Read materials weekly before class.
Study Management:
- 36 contact hours + 250 self-study hours required.
- Create study notes using methods like mind maps or the Cornell method.
Financial News: Regularly read publications such as The Economist and Financial Times for context.

Week 1: Introduction to UK tax system (Chapters 1-6).
Week 2: Employment income (Benefits-in-kind, Pensions, NIS) (Chapters 7-9).
Week 3: Taxation of self-employed individuals (Trading profit adjustments, Capital allowances) (Chapters 10-13).
Week 4: Further taxation of self-employed individuals (Trading loss relief, NIS contribution) (Chapters 15-16).
Weeks 5 & 6: Capital Gain Tax introduction (Chapters 24-26).
Week 7: Computation of capital gains and losses (Allowable expenditures, tax relief) (Chapters 27-29).
Week 8: Corporation Tax introduction (Trading profit adjustments, capital and investment allowance) (Chapters 17-21).
Week 9: Corporation Tax group relief, associated companies, overseas aspects, VAT (Chapters 22, 23, 30, 34, 35).
Week 10: Inheritance tax, exempt transfers, estate valuation (Chapters 32-33).
Weeks 11 & 12: Revision period.

Title: "Taxation: Incorporating the 2023 Finance Act."
Authors: Alan Combs, Ricky Tutin, Nicky Thomas
Edition: 42nd Edition (2023/24)
Content: Offers illustrative examples of statute and case law; provides end-of-chapter questions for self-learning; covers income tax, corporation tax, capital gains tax, inheritance tax, and value-added tax (VAT).

Types of Taxes:
- Direct Taxes: Income tax, capital gains tax, inheritance tax, corporation tax.
- Indirect Taxes: Value-added tax (VAT), customs duties, excise duties.

Direct taxes are charged on income, profits, or gains, paid directly to tax authorities, primarily administered by HM Revenue and Customs (HMRC).
**Main Direct Taxes: **
- Income tax (individuals)
- Capital gains tax (individuals)
- Inheritance tax (individuals)
- Corporation tax (companies)

Definition: Collected by intermediaries (like retailers) from consumers and then paid to the government.
Indirect taxes are also administered by HMRC.
Main Indirect Taxes:
- Value added tax (VAT)
- Customs duties and excise duties

Types of Law:
- Statute Law: Acts of Parliament, amended annually by Finance Acts based on Budget proposals; includes statutory instruments.
- Case Law: Judicial decisions on tax cases act as precedent, assisted by HMRC guidance.

Overview: Taxes apply annually; rates and rules may change yearly.
Tax Year for Individuals: Runs from 6 April to 5 April of the following year (e.g., 2024-25: 6 April 2024 - 5 April 2025).
Tax Year for Companies: Runs from 1 April to 31 March (e.g., FY 2024: 1 April 2024 - 31 March 2025).

HMRC consists of civil servants led by the Commissioners for Revenue and Customs.
Specialist offices handle pensions, charities, etc., with regional centers managing day-to-day operations.
HMRC Officers calculate tax liability and check self-assessments to ensure proper tax payments.

Definition: The system to assess annual income tax and capital gains tax liabilities.
Taxpayers complete a return if not fully deducted at source.
Notices for tax return submissions are issued in April.
Returns can be submitted on paper or electronically, transitioning to digital tax accounts as part of MTD.

Paper Returns: Due by 31 October after the tax year.
Electronic Returns: Due by 31 January following the tax year.
Example: 2024-25 returns must be filed by 31 October 2025 (paper) or 31 January 2026 (electronic).

Payments related to self-assessment typically are as follows:
- First FY POA: 31 January
- Second FY POA: 31 July
- Balancing Payment: 31 January following tax year.

Individuals without a notice but with taxable income must notify HMRC within 6 months of year-end (e.g., for 2024-25, by 5 October 2025).

Taxpayers must retain records to support their tax returns:
- Businesses/landlords: Keep records for 5 years post 31 January of tax year.
- Others: Keep records for 1 year post 31 January.

Taxpayers can appeal HMRC decisions within 30 days in writing.
Most disputes settle via negotiation; unresolved cases can appeal to a tribunal.

HMRC can adjust tax liabilities to counter abusive tax arrangements that exploit legal loopholes.
Taxpayers are notified prior to any adjustments and can appeal the decision.

Background: Rangers FC used Employee Benefit Trusts from 2001-2010 to avoid tax.
Mechanism: Funds paid into EBTs functioned as unrepayable loans rather than taxable salaries.
Outcomes: HMRC challenged, deeming the arrangement abusive; Supreme Court sided with HMRC, enforcing tax payment applicable to the EBTs.

MTD aims to digitize tax returns, transitioning to online accounts pre-filled with HMRC data.
Requirements: Taxpayers must use compliant accounting software.
MTD began with VAT in April 2019, expanding to income tax from April 2026 for certain income levels.

Key topics covered:
- UK taxes, direct and indirect taxes, sources of tax law, specifics of the tax year, functions of HMRC, self-assessment, and updates on tax policies including GAAR and MTD.