Introduction to the UK income tax system and self-assessment

TAX LECTURE 1 NOTES:

OUTCOMES

 Locate the main sources of tax law and practice
 Make use of a combination of statute, case law, and extra-statutory material to solve a tax
problem
 Advise a taxpayer about his or her obligations under self-assessment
 Identify the critical time limits under self-assessment and explain the consequences of failure to
comply
 Describe the role of HMRC and its powers in the context of self-assessment
 Distinguish between income and capital

INTRODUCTION TO THE
UK TAX SYSTEM

Direct taxes:

Based on income, profits, or gains

 Income Tax (IT)
 Capital Gains Tax (CGT)
 Inheritance Tax (IHT)
 Corporation Tax (CT)

Indirect taxes:

Based on spending

 Value Added Tax (VAT)

SOURCES OF TAX LAW AND PRACTICE

1. acts of parliament

2. courts interpret these acts

3. HMRC:

 Statements of Practice
 Extra-statutory concessions
 Notices
 Leaflets
 Internal guidance available on website

STATUTE LAW

 Taxes Management Act 1970 (TMA1970)
 Income & Corporation Taxes Act 1988 (ICTA1988)
 Inheritance Tax Act 1984 (IHTA1984)
 Value Added Taxes Act 1994 (VATA1994)

,  Taxation of Chargeable Gains Act 1992 (TCGA1992)
 Income Tax (Employment & Pensions) Act 2003 (ITEPA2003)
 Income Tax Act 2007 (ITA 2007)
 Income Tax (Trading & Other Income) Act 2005 (ITTOA2005)
 Corporation Tax Act 2009 (CTA 2009)
 Corporation Tax Act 2010
 At least one Finance Act every year
 Finance Act 2022

STRUCTURE OF HMRC

 Inland Revenue and Customs & Excise merged in 2005 -> Now HMRC -> Responsibility of
Treasury, under the Chancellor of the Exchequer
 HM Revenue and Customs (HMRC) is a body of civil servants headed by the Commissioners for
Revenue and Customs
 The routine work of HMRC is carried out by Officers of Revenue and Customs whose main
function is to calculate or "assess" a taxpayer’s tax liability (or check the taxpayer's self-
assessment) and ensure that the correct amount of tax is paid
 HMRC has specialist offices which deal with matters such as pension schemes, charities etc.
 Most day-to-day work is done through local offices or regional centres

DUTIES OF HMRC

 Implement statute law
 Advise Chancellor
 Collect and administer direct and indirect taxes
 Pay and administer child benefits and tax credits.
 National Minimum Wage enforcement, recovery of student loans.

THE TAX YEAR 2022/23

 Tax year: 6th April to 5th April
 6th April 2022 to 5th April 2023 known as 2022/23
 Financial year, for companies, 1st April to 31st March

LECTURE ACTIVITY 1

1. When does the 2022/23 tax year finish?

5/4/23

2. Who is responsible for administering Income Tax?

HMRC

3. Where would you find HMRC’s views about a particular issue?

www.hmrc.gov.uk

SELF-ASSESSMENT