Week 1

• HMRC is the UK's tax authority
• HMRC was established in 2005 – originating from Inland Revenue and Customs
• HMRC reports to Parliament through Treasury minister
• HMRC Collect the money and Offer financial support
• HMRC states for His Majesty Revenue and Customs
• Taxpayers:

  §Individuals:

  • who have income from employment (PAYE)

  -who are self-employed (are sole traders or in partnership)

  -who have other sources of income (dividends, savings interests, property, etc)

  §Businesses:

  -limited companies
• You need to set up as a sole trader and register as self employed if :

  you earned more than £1,000 from self-employment (trading) between 6 April 2023 and 5 April 2024
• §Tax avoidance is to be distinguished from tax evasion, where someone acts against the law. By contrast tax avoidance is compliant with the law, though aggressive or abusive avoidance, as opposed to simple tax planning, will seek to comply with the letter of the law, but to subvert its purpose.
• Tax avoidance examples

  §Paying into ISA account

  §Paying into pension

  §Using tax avoidance schemes

  §Putting assets in your spouse name so he/she can pay a lower rate of income tax.
• §Not declaring all of your income,

  §Not filing a tax return, hiding your assets,

  §Over claiming expenses

  ,§Declaring bankruptcy and restarting company under a different name,
• §At work: National Insurance, PAYE /Income tax
• §At home: Council tax, VAT, Stamp duty
• §Shopping: VAT, excise duty
• §Driving home: Road tax, VAT on petrol
• §In the pub: VAT and excise duty
• The main direct taxes comprise income tax, capital gains tax (CGT), inheritance tax and corporation tax. National Insurance Contributions (NICs) can also be regarded as a form of direct taxation. Indirect taxes include VAT, stamp duty and excise duties
• Taxation law is a combination of both statute law and case law. Statements made by the tax authorities provide information on the authorities interpretation of the law.
• The tax year for individuals runs from 6 April to the following 5 April. The corporation tax financial year runs from 1 April to the following 31 March
• Individuals who fall within Self Assessment are normally required to submit an annual tax return. Paper returns must be filed by 31 October following the end of the tax year. Returns submitted electronically must be filed by the following 31 January.
• Taxpayers who submit a paper tax return have the option of calculating their own tax liability. If a return is submitted electronically, the liability is calculated by HMRC's computer software. The resulting assessment is referred to as a "self-assessment".
• The tax due in relation to a self-assessment is normally satisfied by making two payments on account (which fall due on 31 January in the tax year concerned and on the following 31 July) and then a balancing payment on the following 31 January.
• A taxpayer who has not received a tax return notice, but has taxable income or gains of which HMRC is not aware, must notify HMRC of his or her chargeability to tax within six months of the end of the tax year in which the income arises.
• If a tax return is submitted by the required filing date, HMRC cannot usually initiate an enquiry into the return more than 12 months after the date on which the return is submitted. Discovery assessments may be made after the enquiry window has closed if it is discovered that the taxpayer has not made full disclosure of all relevant facts.
• Tax appeals which cannot be settled by agreement between the taxpayer and HMRC are dealt with by a two-tier tribunals system. Disputes on a point of law may be further referred to the Court of Appeal.
• Tax evasion involves dishonest conduct by the taxpayer and is illegal. Tax avoidance involves the sensible arrangement of the taxpayer's affairs so as to minimise the tax liability and is legal. However, abusive tax avoidance schemes may fall foul of the general anti-abuse rule (GAAR) and be counteracted by HMRC.
• As from 6 April 2026, it is expected that self-employed taxpayers and landlords with qualifying trading and property income exceeding £50,000 p.a. will be mandated to join MTD ITSA. As from 6 April 2027, this will be extended to those with qualifying income exceeding £30,000 p.a.
• A taxpayer who joins MTD ITSA will be required to use MTD- compliant software to keep digital records of income and expenses and submit quarterly updates to HMRC. It will also be necessary to submit a final declaration at the end of each tax year.
• Taxpayers who are not mandated to join MTD ITSA may nevertheless join if they so wish. Digitally excluded taxpayers are exempt.