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Understanding the Principles of Taxation Assignment Sample

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Understanding the Principles of Taxation Assignment

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British taxation systems and tax rates and allowances for the tax year 2021/22 for businesses and individuals

The basic taxes in the UK government include for collecting the tax that is income taxes, capital gains, property taxes, taxes of the UK inheritance, and also collect the taxes from which are value added that mean is VAT, these taxes are collected from the UK’s public to UK government (Melé et al. 2017). In the above taxes many of these taxes are progressive taxes, that also carry the meaning that those who earn or income higher money in the UK pay higher income taxes to the UK government. Before the UK’s citizens can also pay the taxes in the government of the UK, the UK’s citizens need the insurance number which was given by the UK’s government to the UK’s citizens.

The rate of the taxes also depends on the income of the citizens, if someone earns higher money they give the tax at a higher rate and whoever earns minimum money from the UK government they are paying the minimum rate to the UK governments. In the UK also free the tax for some income that also depends on the income money. The personal allowance which is the standard allowance for the individual that is 12,570 dollars is the incomes amount which the government of the UK is not taking any pay tax from the citizens (Huttunen et al. 2019). That the personal allowance the UK’s citizens also claim for the higher personal allowance through the claim of the marriage allowance or the allowance who are blind persons. The UK government also gives the extra allowance for this type of people after the claim of it.

Rates of Income tax in Uk

Band

Taxable income

Rate of tax

Personal Allowance

0 - 12,570 Dollars

0 percent

Basic rate

12,571 - 50,270 Dollars

20 percent

Higher rate

50,271 - 150,000 Dollars

40 percent

Additional rate

Over 150,000 Dollars

45 percent

The above already says about who is not paying any taxes and why and here also defines who is paying the minimum tax to higher tax. Earns the money in between the 12,571 to the 50,270 dollars they are paying 20 percent of their income money to the UK’s government and that is the basic rates of the income tax. The higher rate is the start who earns the money from 50,271 dollars to the 150,000 dollars they are paying the high rate tax which is 40 percent of the income. And the addition rate starts from those who earn the money above 150,000 dollars they pay the tax 45 percent of the income. That is the recent income tax rates in the UK (Amaraand Benelifa, 2017). Who were the sole traders and who opened the companies which are under the limited company they were not paid any taxes and they have not any national insurance in the UK. They are also paid the tax of the corporation on their profit. Here the recent rate of the tax is 19% for those who earn money through their business in the UK.

Taxation liabilities and implications for incorporated, unincorporated organizations and for individuals working as sole traders and partnerships.

The sole traders, who have not any existence which is legally, separate from any business. As per the UK governments law, the owner and the business are also the same. And as per result of these things the owner of any business is liable personally for the debts of the firms and might have to pay for the losses through the business off of the owner's pocket. That is known as the unlimited taxation liability. The tax liability of a corporation also refers to the obligation which is legal for a company which is limited to their tax pay on m annual profits of it. As the directors they must register their company with the HMRC for the taxes of the corporation, and liability pay within the month of nine and the company’s one day it accounts at year end. The unincorporated association also indicates the association which is not a person who is legal (Malo-Alain et al. 2021). The group of the people who want to enter into the contract to rent a room for the business meeting, but they are not able to do the same things but they are also hiring a person to do that on behalf of them. Similarly, the association of unincorporated people can not own any property but they must appoint someone, and this is usually a committee, and this committee is also able to hold any property like a trusty. For the individual case time the taxable income also minus from the tax deductions and that's equal to the liability of the gross taxation. In the unlimited partnership, the liability of the every partner, jointly with the all partners of the other and also the severally, to all the acts of the firm while someone is the partner. That partner can be organized and responsible personally for the other partner’s carelessness.

Taxation legislation that will have implications on national and global taxation

The taxation power, that is both legislative and inherent in the character due to it, has been returned by the UK state to it to exercise. This is inherent due to the government's sustenance requires the contribution from them. The taxation power is also legislative in the character due to only can make the legislature the laws of the tax (Hung, 2018). An income tax which is the global tax which is single and it is also imposed on the income of all, whenever it’s the nature. In the system of the benchmark scheduler, the gross income and the expenses which are deductible that also determine the separately to the each income type, and in some cases, deductions which are limited or not, the deduction might be allowable.

The impact of the legal and ethical constraints associated with taxation responsibilities at regional, national and international levels.

The tax fairness law or the quality of the tax which is normal that is also important due to it also determines the constituents reach of the obligation to the taxes paying and the voluntary level compliance (Brooks and Oikonomou, 2018). The main important thing is the enforcement of the tax law for ensuring the adequate voluntary level compliance, but the use method is needed to be proportional and balanced. The main impact for not paying any taxes is fair to the government and that shows the results in reduction of the facilities of the healthcare sectors, the programs of the minimum education system, and some impact also seen to the policies of the limited infrastructure. The non-payments of the appropriations taxes to the governments and for the affecting is also shown the economy development area is not growing and also the economies of the countries go down. And at the international level it also saw the GDP growth of the countries also down and the price of any product increase and that is very bad for the citizens who belong to these countries, this ultimately affects the savings and the investment.

How to minimize the impact of key legal and ethical constraints discussed above.

That is several things to do for reducing the impacts of key and the ethical constraints about avoiding taxation. That is defined in below

  1. Make sure that the citizens paid all the right taxes.
  2. Keep the records of the organization accounting.
  3. Consider automating the system of accounting of all organizations or companies.
  4. Consider computerizing the system of the payroll of every citizen.

That is all things for the planning of the taxation arrangements which go beyond the intent of the policy law and the deliberate approach which is involved in approaches to exploit the system of the tax that are not ethical (Procházka, 2018). To reduce the avoidance of the rate of the tax it makes the law is simplified and designed or it organizes the administration of the tax structure.

Justified recommendations for improvements of effective tax systems.

The recommendation for improve the system to effective tax that is needed to divide all businesses into large, small, and medium with a separate rule for that organization. Most of all credit and the deduction money also eliminate. Move to the system of a territory that taxes only the income of the domestic (Chytis, 2019). Income tax elimination on the dividends received from the companies of the US. The policy maker also can directly increase the revenue through the rates of the increasing tax, break the reducing tax, the basis of the tax is also expanding, improving the enforcement, and levying the taxes which are new (Cockcroft and Russell, 2018). They also can increase the revenue by the policies and that also increases the activity of the economy, wealth and income.

1.2 Calculation of taxation liabilities for both unincorporated and corporate organization

1.2 (A) Calculation of corporation tax 2020/2021

Glen Food Ltd.

Particulars

Amount (£)

Amount (£)

Sales

120000

Add: received interest

100

Total income

120100

Less: Total overheads

(59165)

Profit before accounts

60935

Add: depreciation

600

Add: entertaining

1000

Less: capital equipments

(1800)

Profit liable to corporation tax

60735

Corporation tax @ 19% (60735 x 19%)

11540

The corporation tax is 19 percent and after calculating the taxes of the corporation that is 11540 dollars.

1.2 (B) Calculation of tax for unincorporated

John Hairdressing Ltd.

Particulars

Amount (£)

Amount (£)

Sales

60000

Services

2000

Other income

4000

Total income

66000

Less: expenses

Accounting

500

Advertising expenses

300

Electricity

600

Wages

2500

Other expenses

250

Charity

500

Council tax

1500

Rent

12000

Gas

700

Water

760

Total expenses

(19610)

Less: Personal allowance

(12570)

Income before tax

33820

Tax liability (33820 x 5%)

1691

Income after tax of 5%

32129

For the unincorporated are the calculating liability taxes is 5 percent and that is 1691 dollars, and the income after tax is 5 percent and that amount is 32129 dollars (Ozili, 2021).

1.3 Calculation of income tax payable

Particulars

Amount (£)

Amount (£)

Employment income

16985

Gilt interest received

340

Dividends

15560

Total income

32885

Income tax payable of 5%

1644

Income after deducting the tax

31241

The payable income tax is 5 percent and its amount is 1644 dollars, and the income after deducting the all taxes amount is 31241 dollars.

1.4(A) Calculation of tax payable and National insurance contribution

Particulars

Amount (£)

Amount (£)

Trading income

21690

Bank interest

500

Total income from self employed business

22190

National insurance contribution 9%

1997

Income tax payable

20193

The national insurance contribution rate is 9 percent of the income and that amount is 1997 dollars, and the income tax payable is 20193 dollars.

1.4(B) Calculation of late penalty and payable interest

Total debt = £1997

Total number of late days = 44

Late penalty interest = 1997 / 44

Late penalty interest = 45.38

The late penalty interest is 45.38 dollars.

Reference list

Journals

Amara, T. and Benelifa, S., 2017. The impact of external and internal factors on the management accounting practices. International Journal of Finance and Accounting6(2), pp.46-58.

Brooks, C. and Oikonomou, I., 2018. The effects of environmental, social and governance disclosures and performance on firm value: A review of the literature in accounting and finance. The British Accounting Review50(1), pp.1-15.

Chytis, E., 2019. The informative value of taxes: The case of temporal differences in tax accounting. Journal of Accounting and Taxation11(8), pp.130-138.

Cockcroft, S. and Russell, M., 2018. Big data opportunities for accounting and finance practice and research. Australian Accounting Review28(3), pp.323-333.

Hung, D.N., 2018. Impact of accounting information on financial statements to the stock price of the energy enterprises listed on Vietnam's stock market.

Huttunen, J.E.N.N.I.F.E.R., Jauhiainen, J.A.A.N.A., Lehti, L.A.U.R.A., Nylund, A.N.N.I.N.A., Martikainen, M.I.N.N.A. and Lehner, O.M., 2019. Big data, cloud computing and data science applications in finance and accounting. ACRN Oxford Journal of Finance and Risk Perspectives8, pp.16-30.

Malo-Alain, A., Aldoseri, M. and Melegy, M., 2021. Measuring the effect of international financial reporting standards on quality of accounting performance and efficiency of investment decisions. Accounting7(1), pp.249-256.

Melé, D., Rosanas, J.M. and Fontrodona, J., 2017. Ethics in finance and accounting: Editorial introduction. Journal of Business Ethics140(4), pp.609-613.

Ozili, P.K., 2021. Accounting and financial reporting during a pandemic. In New Challenges for Future Sustainability and Wellbeing. Emerald Publishing Limited.

Procházka, D., 2018. The Impact of Globalization on International Finance and Accounting. Springer.

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