MAN2105 Introduction to Taxation Notes

MAN2105
Introduction to Taxation Notes

Module Leader Notes
• Module Leader- Rebeka Ashdown
• Module Leader Office- 34MS02
• Module Leader Email-

Module Textbook
• Business Taxation (Finance Act 2020)
• Authors: Aubrey Penning & Bob Thomas (Edition FA 2020)
• Publisher Osborne Books
• ISBN 978-1-911198-46-8

Module Schedule




Module Assessment Information
• Assessment 1:
o 30% Weighting.
o 50 Minutes in Length.
o MCQ.
o During Week 7.
o Covers Weeks 1-6.
• Assessment 2:
o 70% Weighting.
o Two Hours in Length.
o Covers the entirety of Weeks 1-11.
o Compulsory Question worth 50 marks on Corporation Tax.
o Remaining 50 Marks on Other Compulsory Questions examining Income Tax
and Capital Gains Tax.

,Week 1
Introduction to Business Taxation and Corporation Tax

Introduction to Business Taxation
• No obvious start point to teach tax.
o Tax changes and develops over time.
• 2 Sources of Authority to Levy Taxes:
o Statute Law passed by parliament (Finance Acts).
o Case Law- Authority from decisions taking in court cases.
• Tax is Jurisdictional- UK tax for business residing in the UK.

How a Business is Taxed Depends on How it is Structured
• No distinction between owners/ business:
o Partnership/ Sole Traders:
▪ Income Tax.
▪ Capital Gains Tax.
▪ Class 1 NIC- Employees.
▪ Classes 2 & 4 NIC- Owners/ Partners.
• Separate Legal Entity:
o Ltd Company/ PLC.
▪ Corporation Tax.
▪ CT (Chargeable Gains).
▪ Class 1 NIC- Employees.

The Tax System
• Her Majesty’s Revenue and Customs (HMRC) (formed 2005) amalgamation between
IR (Inland Revenue) & HMC&E (Her Majesty’s Customs & Excise).
o Administers all income tax (IT), corporation tax (CT), and capital gains tax
(CGT).
o Also collects all NIC (national insurance contributions and VAT).
• Self-Assessment System, all must declare income/ profits on time on set forms/
calculate and pay tax without ever being sent a bill.

An Outline Corporation Tax (CT) Computation
£
Trading Income x
(+) Income from Investments x
(+) Chargeable Gains x
(=) Taxable Total Profits (TTP) x
Corporation Tax on TTP x



An Outline Income Tax (IT) Computation
£
Income- Earnings and Other Income x
Less Personal Allowance (x)

,(=) Taxable Total Profits (TTP) x
Tax Payable on Taxable Income x

Financial Years and Tax Years
Finance Act Tax Year Dates
2020 2020/2021 1/4/2020-31/3/2021
CT-Financial Year

6/4/2020-5/4/2021
IT- Tax Year/ Fiscal Year

Companies Individuals (Sole Traders and Partnerships)
• Company Tax Return (CT600) • Tax Returns Incl.
includes a calc. of CT for supplementary pages for
chargeable accounting Sole Traders and Partners
period (CAP). and relates to Tax Year.
• Return submitted online 12 • Paper return submitted by
months after end of period 31 October following tax
that accounts are based on. year, or online submitted by
• Final Payment by 9 months 31 Jan following tax year.
and 1 day after CAP. • Final payment by 31 January
• Large companies also make following tax year.
earlier instalment payments. • Most taxpayers make 2
payments on account.




Case Study: Diverse Accounting Practice (Pg., 1.13)

, Mammouth company- Corporation Tax (CT)

Type of Tax: CT CT600
Y/E: 1.2.19-31.1.20 = CAP Financial Year: 1.4.19- FY 2019/20
31.3.20
Online Submission of CT600 12 Months after end CAP 31.1.21
Final Payment of Tax 9 Months and 1 Day after 1.11.20
end CAP

Jo Small- Income Tax (IT)

Type of Tax: IT Main Form Plus
Supplementary pages for a
Sole trader
Y/E: 1.7.19- 30.6.20 = Basis Tax Year: 6.4.20-5.21 TY 2020/21
Period
Online Submission of Tax 31 Jan following end of TY 31.1.22
Return
Final Payment of Tax 31 Jan following end of TY 31.1.22


National Insurance
• NIC payable by self-employed individual’s (ST & Partners).
o Class 2- Payable Flat Rate £3.05 p.w. (unless small earnings exception <
£6,475) and in addition
o Class 4- Payable on Profits > £9,500 p.a.
▪ 9% of Profits between £9,500 and £50,000 plus;
▪ 2% of Profits above £50,000.
▪ (If profits < £9,500, no Class 4).

Tax Data