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United Kingdom Taxation
1) The document provides an overview of taxation in the United Kingdom, outlining various taxes such as income tax, value added tax, corporate tax, capital gains tax, and others. 2) Key details are given for each tax, including tax rates, allowances, payment deadlines, exemptions, and penalties. 3) Taxes are levied by both central and local governments in the UK, with revenue from taxes going towards public services and programs.
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United Kingdom Taxation
- 1. United Kingdom TAXATION Gevorg Beglaryan GorShahbazyan Mariam Petrosyan Marina Sedrakyan YEREVAN 2015
- 2. • GDP2014 –2,853.357 billion • Unemployment RateFeb. 2015 – 5.6% • Corporate Tax Rate – 21% • Personal Income Tax Rate – 45% • Sales Tax Rate – 20% • Social Security – Companies – 13.8% – Employees – 12% United Kingdom: Economic Overview 2
- 3. Tax Bodies andTaxes Central Government Local Governments – Income Tax – National Insurance – Value Added Tax – Corporation Tax – Capital Gains Tax – Inheritance Tax – Stamp Duty – Excise Duty – Customs Duty – Insurance Premium Tax – Air Passenger Duty – Council Tax – Domestic Rates in Northern Ireland – Business Rates in England and Wales – Business Rates in Scotland 3
- 4. INCOME TAX ¿Payers? Residentsand Non-residents ¿Tax base? Residents – Worldwide Income Non-Residents – Only UK Income ¿Payment Frequency? Quarterly ¿Couples? Considered as one taxpayer ¿Deadline? January 31 ¿Declaration? Filled once in 5 years 4
- 5. 5 INCOME TAX: Taxableincome You pay tax on: • Employment/self employment earned money • Some state benefits • Most pensions: state pensions, company and personal pensions and retirement annuities • Interest on savings and pensioner bonds • Rental income(unless you’re a live-in landlord and get £4,250 or less) • Benefits you get from your job • Income from a trust • Dividends from company shares You don’t pay tax on: • Income from tax-exempt accounts: ISAs (15,240) • Some state benefits • Premium bond or National Lottery wins • The first £4,250 of the rent you get from a lodger in your home
- 6. INCOME TAX Tax year2015-2016 Income Range Normal Rates Dividend Rates Basic Rate Up to £31,785 20% 10% Higher Rate £31,785 - £150,000 40% 32.5% Additional Rate Over £150,001 45% 37.5% 6 Rates
- 7. INCOME TAX: Personalallowances Tax year 2015-2016 Born between 6 April 1938 and 5 April 1948 2015-2016 £0 to £26,999 £10,500 £27,000 to £27,999 Between £10,500 and £10,000 and the allowance goes down by £1 for every £2 that your adjusted net income is over £27,000 £28,000 to £100,000 £10,000 7 Born before 6 April 1938 2015-2016 £0 to £27,699 £10,660 £27,700 to £27, 819 Between £10,660 and £10,000 and the allowance goes down by £1 for every £2 that your adjusted net income is over £27,700 £28,820 to £100,000 £10,600
- 8. SELF ASSESMENT DEADLINE Registerfor self assessment Register by 5 October 2015 Paper tax returns Midnight 31 October 2015 Online tax returns Midnight 31 January 2016 Pay the tax you owe Midnight 31 January 2016 8 INCOME TAX Tax year 2015-2016 If your tax return is up to 3 months late you’ll pay fine of £100. Deadlines and Penalties
- 9. CORPORATE TAX ¿Payers? Residentsand Non-residents ¿Tax base? Residents – Worldwide Income Non-Residents – Only UK Income ¿Payment Frequency? Annually ¿Couples? Considered as one taxpayer ¿Declaration? Filled once in 5 years 9
- 10. The Corporation ProfitTax Rate is 20% since 1 April, 2015. Since April 1, 2014 10 CORPORATE TAX Tax year 2015-2016 Profit Rate Small Profit < £300,000 20% Above £300,000 21% Marginal Profit £300,000 to £1,500,000 Only before 1 April, 2015 Rates
- 11. CORPORATE TAX: Deductions •Revenue expenses – deductible • Interest and other financing costs – deductible • Accounting depreciation – non-deductible • Goodwill, intellectual property etc. – deductible 4% Patented Inventions RP*FY%((MR-IPR)/MR) RP – profits from patent FY – percentage MR – main rate of profit tax IPR – reduced rate of 10% 11 Financial Year Percentage 1 April 2013- 31 March 2014 60% 1 April 2014 –31 March 2015 70% 1 April 2015 –31 March 2016 80% 1 April 2016 –31 March 2017 90% 1 April 2017 – 100%
- 12. Corporate Tax: Penalties Typeof failure Penalty range(unprompted) Penalty range (prompted) Careless 0%- 30% 15% - 30% Deliberate but not concealed 20% - 70% 35% - 70% Deliberate and concealed 30% - 100% 50% - 100% 12
- 13. WITHHOLDING TAXES Dividends arealways paid gross. • Patent, copyright, royalties in UK => WHT=20% • Several types of royalties are not subject for WHT: film royalties, equipment royalties • Interest payments => WHT=20% Exclusions: payments of interest • By UK company to UK resident company • That qualify for exemption under EU interest and Royalties Directive • Paid to/by UK bank • “short” interests • That don’t arise in the UK 13
- 14. ¿Declaration? Quarterly VALUE ADDEDTAX 14 ¿Payers? Businesses registered for VAT ¿Tax base? Taxable supplies ¿Payment Frequency? Every time a sales transaction takes place ¿Deadline? 1 calendar month and 7 days after the end of an accounting period
- 15. 15 • Any person(legal or individuals) is liable to register for VAT if the combined value of its taxable supplies in the UK exceeded the registration threshold of £82,000 in the preceding 12 months. • Businesses making only zero rated supplies can request exemption from registration. • Businesses with taxable turnover below the registration thresholds may apply to be registered on a voluntary basis. • A business may deregister if the anticipated value of its taxable supplies in the next 12 months is less than the deregistration threshold of £80,000. • Where a business is involved only in the making of exempt supplies, it’s not able to register for VAT and is thus not able to recover any input VAT incurred. VALUE ADDED TAX
- 16. VALUE ADDED TAX ¿TaxableSupplies? • Business Sales • Hiring or loaning goods to someone • Selling business assets • Commission • Business goods used for personal reasons 16
- 17. VALUE ADDED TAX 17 Rates Rate% of VAT What the rate applies to Standard 20% Most goods and services Reduced rate 5% Some goods and services, eg children’s car seats and home energy Zero rate 0% Zero-rated goods and services, eg most food and children’s clothes The standard rate of VAT increased to 20% on 4 January 2011 (from 17.5%).
- 18. 18 Surcharges and penalties VALUEADDED TAX Defaults within 12 months Surcharge if annual turnover is less than £150,000 Surcharge if annual turnover is £150,000 or more 2nd No surcharge 2% (no surcharge if this is less than £400) 3rd 2% (no surcharge if this is less than £400) 5% (no surcharge if this is less than £400) 4th 5% (no surcharge if this is less than £400) 10% or £30 (whichever is more) 5th 10% or £30 (whichever is more) 15% or £30 (whichever is more) 6 or more 15% or £30 (whichever is more) 15% or £30 (whichever is more) HMRC can charge you a penalty of up to: •100% of any tax under-stated or over-claimed if you send a return that contains a careless or deliberate inaccuracy •30% of an assessment if HMRC sends you one that’s too low and you don’t tell them it’s wrong within 30 days •£400 if you submit a paper VAT Return, unless HMRC has told you you’re exempt from submitting your return online.
- 19. VALUE ADDED TAX 19 Exemptions 1.Land 2. Insurance 3. Postal services 4. Betting, gaming and lotteries 5. Finance 6. Education 7. Health and welfare 8. Burial and cremation 9. Subscriptions to public interest bodies 1. Subscriptions to public interest bodies 2. Sports, sports competitions, phys. education 3. Works of art, etc. 4. Fund–raising events 5. Cultural services, etc. 6. Supplies of goods where input tax cannot be recovered 7. Investment gold 8. Supplies of services by groups involving cost sharing
- 20. INSURANCE PREMIUM TAX ¿Payers? •an insurer who receives or intends to receive taxable insurance premiums; • someone who charges the insured an insurance related fee in respect of a higher rate contract (a taxable intermediary). ¿Tax base? General insurance premiums 20 ¿Deadline? You need to tell HMRC within 30 days of forming the intention of receiving taxable premiums as the insurer. ¿Tax rate? • a standard rate 6% • a higher rate 20% - for travel insurance, mechanical/electrical appliances insurance and some vehicle insurance
- 21. INSURANCE PREMIUM TAX ¿Whenshould you register? • You must be registered from the date you receive your first taxable premium. • You need to tell HMRC within 30 days of forming the intention of receiving taxable premiums as the insurer 21 If you fail to notify about a change in registration particulars, on time, you may be liable to a penalty of £250. ¿Exemptions? Long-term insurance Reinsurance Insurance for commercial ships and aircraft Insurance for commercial goods in international transit Premiums for risks located outside the UK
- 22. NATIONAL INSURANCE ¿Payers? anemployee earning above £155 a week; self-employed and making a profit of £5,965 or more a year ¿Tax base? Gross earnings ¿Payment Frequency? Annually ¿Couples? Considered one taxpayer ¿Deadline? April 5-6 ¿Declaration? Filled once 22
- 23. NATIONAL INSURANCE 23 National Insurance Classes Class1 Class 1A or 1B Class 2 Class 3 Class4 Employees earning more than £155 a week and under State Pension age - they’re automatically deducted by your employer. Employers pay these directly on their employee’s expenses or benefits. Self-employed people - you don’t have to pay if you earn less than £5,965 a year (but you can choose to pay voluntary contributions). Voluntary contributions - you can pay them to fill or avoid gaps in your National Insurance record. Self-employed people earning profits over £8,060 a year.
- 24. 24 NATIONAL INSURANCE Rates You’ll payless if: • you’re in a contracted out workplace pension • you’re a married woman or widow with a valid ‘certificate of election’ • you’re deferring National Insurance because you’ve got more than one job Classes Rate for tax year 2015 to 2016 Class 1 £155 to £815 a week (£672 to £3,532 a month) and Over £815 a week (£3,532 a month) Class 2 £2.80 a week (if your profits are £5,965 or more a year) Class 4 9% on profits between £8,060 and £42,385 2% on profits over £42,385
- 25. Penalties 25 • 5% fornot having paid the full amount within 30 days of the due date; • an additional 5% penalty for not having paid the full amount within 6 months of the due date; • a further 5% penalty for not having paid the full amount within 12 months of the due date. NATIONAL INSURANCE
- 26. CAPITAL GAINS TAX ¿Deadline?January 31 26 ¿Payers? Residents and Non-residents ¿Payment Frequency? On event of selling ¿Couples? If you are married or in a civil partnership and living together you can transfer assets to your husband, wife or civil partner without having to pay CGT. ¿Declaration? No declaration
- 27. CAPITAL GAINS TAX ¿Taxbase? 1. Most personal possessions worth £6,000 or more, apart from your car. 2. Property that isn’t your main home. 3. Your main home if you’ve used it for business or it’s very large. 4. Most shares. 5. Business assets. 27
- 28. 28 CAPITAL GAINS TAX Allowancesand Rates Year 2014-15 2015-16 Allowance £11,000 £11,100 Rate 18% or 28%, depending on your tax band 18% or 28%, depending on your tax band
- 29. Capital gains tax:penalties 29 If you miss the deadline of October 31 (paper return) or January 31 (online return) late filling penalties will apply. Length of delay Penalty due Up to three months £100 3 months – 6 months £10 per day – max £900 – plus the above 6 months – 12 months Max {£300; 5% of tax due + all above} 12 months or more Max {£300; 5% of tax due+ all above}. In serious cases up to 100% of the tax can be due instead.
- 30. Customs Duty • Chargedon imported goods produced outside EU if they’re above a certain value, unless the duty comes to less than £9. The value includes: • The price paid for the goods • Postage, packaging and insurance You don’t pay Customs duty when travelling from EU and buying/sending goods for you personal use. If you travel from outside the EU, you should pay Customs duty on the exceeding amount of your duty-free allowance. 30 Type and value of goods Customs Duty Anything under £390 No charge Gifts worth £390 - £630 2.5% Other goods above £630 The rate depends on the type of good
- 31. Alcohol allowance • Beer– 16 litres • Wine (not sparkling) – 4 litres • Spirits and other liquors over 22 % alcohol – 1litre • Fortified wine (sherry) sparkling wine and alcoholic drinks up to 22% alcohol-2litre Tobacco Allowance • 200 cigarettes • 100 cigarillos • 50 cigars • 250g tobacco 31 Customs Duty: Allowances There are more than 14,000 classifications and the duty rate is different based on the country where the good is coming from. The Average rates are 5% - 9%.
- 32. Two main customspenalties 32 Customs Duty: Penalties Customs Civil Penalties (CCPs)-may be imposed when traders have contravened customs rules and regulations that relate to customs duty, community export duty, community import duty, import VAT or duties of a preferential tariff country The minimum penalty is £250 and the maximum penalty for further breaches is either £1,000, or £2,500 for more significant breaches Customs Civil Evasion Penalties (CCEPs)-may be imposed when it can be established that a trader has dishonestly evaded the payment of an import duty, an export duty or import VAT CCEPs are worked out as a percentage of the duty traders have evaded or sought to evade. The penalty is equal to the duty dishonestly evaded or sought to be evaded.
- 33. AIR PASSENGER DUTY Payers Youneed to register and pay Air Passenger Duty (APD) if you operate a fixed wing aircraft from any UK airport that: • weighs 5.7 tonnes or more • is fuelled by kerosene • carries passengers whether they’ve paid for the flight or not 33 Frequency An annual accounting scheme is available, which lets you make just one return each year. To qualify for the scheme the annual total of APD your business is likely to pay must be £500,000 or less.
- 34. AIR PASSENGER DUTY 34 Taxrate Destination Bands and distance from London (miles) Reduced rate: (for travel in the lowest class of travel available on the aircraft) Standard rate: (for travel in any other class of travel) Higher rate: (for travel in aircraft of 20 tonnes or more equipped to carry fewer than 19 passengers) Band A (0 to 2,000 miles) £13 £26 £78 Band B (over 2,000 miles) £71 £142 £426 From April 1, 2015
- 35. Destination Bands and distancefrom London (miles) Reduced rate: (for travel in the lowest class of travel available on the aircraft) Standard rate: (for travel in any other class of travel) Higher rate: (for travel in aircraft of 20 tonnes or more equipped to carry fewer than 19 passengers) Band A (0 to 2,000 miles) £13 £26 £78 Band B (over 2,000 miles) £73 £146 £438 AIR PASSENGER DUTY 35 Tax rate From April 1, 2016
- 36. AIR PASSENGER DUTY 36 Exempt •Flight crew • Children under the age of 12 • Transit passengers • Emergency/ Public Service flights • NATO flights • flights which are intended to be of 60 minutes duration or less or etc.
- 37. AIR PASSENGER DUTY 37 Penalties Fixedpenalty £250 chargeable for each offence Geared penalty (1) 5% of duty involved in the offence or £250, whichever is greater Geared penalty (2) This is a new penalty that for APD will apply to failure to give notice of liability to be registered and return or document inaccuracies. These penalties, which could be up to 100% of the duty due, depending on the circumstances of the case. Daily penalty £20 per day for each day the offence continues. Can only be issued if a fixed or geared penalty has already been issued for the same offence.
- 38. Annual Tax onEnveloped Dwellings (ATED) Annual Tax on Enveloped Dwellings (ATED) is payable by companies that own UK residential property (a dwelling) valued above a certain amount. ATED return is calculated if the property is • is in the UK • was valued at more than £1 million • is owned completely or partly by a company, a partnership 38
- 39. Annual Tax onEnveloped Dwellings (ATED) Chargeable amounts for chargeable period 1 April 2015 to 31 March 2016 39 Property value Annual chargeable amount 2015 to 2016 More than £1 million but not more than £2 million £7,000 More than £2 million but not more than £5 million £23,350 More than £5 million but not more than £10 million £54,450 More than £10 million but not more than £20 million £109,050 More than £20 million £218,200
- 40. Annual Tax onEnveloped Dwellings (ATED) Exempt • hotels • guest houses • boarding school accommodation • hospitals • student halls of residence • military accommodation • care homes • prisons • historic houses 40
- 41. Annual Tax onEnveloped Dwellings (ATED) Reliefs • let to a third party on a commercial basis and isn’t occupied by anyone connected with the owner • open to the public for at least 28 days a year • part of a property trading business and isn’t occupied by anyone connected with the owner • for the use of employees of the company, for the company’s commercial business and where the employee does not have an interest (directly or indirectly) in the company of more than 10% • a farmhouse, if it is occupied by a qualifying farm worker who farms the associated farmland • a dwelling acquired by a financial institution in the course of lending • owned by a provider of social housing 41
- 42. Annual Tax onEnveloped Dwellings (ATED): Penalties Late returns will be liable to a penalty of £100 per return. Further penalties fall due for returns that are 6-12 months late (max {5% of tax due, £300}). In addition, where the returns are more than 3 months late, HMRC may choose to impose a daily penalty of £10 per day. In case the payment is 12 months late, HMRC can also apply penalty of 30% of tax due for payments that contain “careless” errors. Companies are also obliged to maintain adequate records until the end of the period during which HMRC may enquire and failure to do so may result in a penaly of up to £3000. 42
- 43. Excise Duty • Whenyou buy excise duty taxed items in the UK the price already includes the tax amount. • When travellers bring such goods to UK from EU Member country it is considered that the tax is already paid in the home country. • When travellers bring such goods to UK from outside the EU country, they pay excise duty if they exceed the duty-free allowance • If alcohol or tobacco products are sent to the UK Excise Duty is payable wholly. 43
- 44. EXCISE DUTY: Rates StrengthDuty rate per l for each % of alcohol General Beer Duty 18.74 1.2% - 2.8% 8.10 pence 2.8% - 7.5% 18.37 pence > 7.5% 23.85 pence 44 Wine and made-wine of more than 22% strength is classified as spirit and the duty is £27.66. Excise Wine Duty is stated for strengths between 1.2% - 15% and the duty is £84.21 – £350.07. Payment of Cider Duty depends on the strength and whether it is sparkling or still. Hence, strengths vary from 1.2% - 8.5% and the rate per litre is 38.87 pence – 264.61 pence.
- 45. 45 Inheritance Tax Rates Above threshold£ 325,000- 40% inheritance tax 36% if 10% and more of the estate is given for charity Estates pay Inheritance Tax if the inheritance is valued more than the threshold £325,000. •Usually the executor or the ‘administrator’ of the estate using the funds from the estate. •Trustees are responsible for paying Inheritance Tax on trust: When assets are transferred into a trust; When someone dies and a trust is involved when sorting out their estate; when a trust reaches a 10 year anniversary of when it was set up. Payers
- 46. 46 Who Pays inheritanceTax Need To pay Income Tax on profit you later earn from your inheritance Capital Gains Tax if you later sell shares or a property you inherited Inheritance Tax on a gift the person gave you in the 7 years before they died. Inheritance tax if your inheritance is put into a trust and the trust can’t or doesn’t pay You must pay Inheritance Tax by the end of the sixth month after the person died.
- 47. 47 Inheritance Tax: Penalties IHTreturn is 6 months late – max {£300, 5% of tax due} 12 months and more – max{£300, 70% of the tax due} The 70% figure can be reduced to 20% if the return is duly made without prompting from HMRC. If HMRC discovers inaccuracy first and writes to prompt a disclosure, the minimum penalty will be 15%.
- 48. 48 Inheritance Tax exemptionsand reliefs •Charities. gifts to charities, museums, universities or community amateur sports clubs. Political parties. 2 members elected to the House of Commons or 1 member elected to the House of Commons and received at least 150,000 votes in a general election •Payment to live with living costs. Such as ex husband, child under 18 years old or in full-time education, old age relative. •Small gifts up to £ 250 Regular gift from the givers income. Christmas, birthday and wedding or civil partnership anniversary presents, life insurance policy premiums, regular payments into a savings account
- 49. 49 Inheritance Tax exemptions andreliefs •Wedding gifts. There’s no Inheritance Tax on a gift that was a wedding gift worth up to: £5,000 to a child £2,500 to a grandchild or great-grandchild £1,000 to anyone else Business relief. Allows a business to be passed on as a going concern by reducing the Inheritance Tax on it by up to 100%. •Agricultural relief. Allows a working farm to be passed on as a going concern without paying Inheritance Tax on it. Woodland relief. Allows the value of the timber (but not the land) exclude from your estate. Whoever inherits the woodland may have to pay Inheritance Tax when they sell the timber - unless it qualifies for Agricultural or Business Relief. If the woodland also qualifies for Agricultural Relief or Business Relief it won’t qualify for Woodland Relief. Heritage relief. Allows exempt inheritance taxi in case of owning something of historic or scientific interest such as building, lands and works of art.
- 50. 50 Stamp Duty LandTax Rate • You have to pay Stamp Duty Land Tax (SDLT) if you buy a property in the UK over a certain price. • SDLT rate depends on: the purchase price of the property whether the property is residential whether the buyer is a corporate body It may also be due if you lease a property
- 51. • Purchase Priceof the property: Previously charged at a single rate for the entire price From 4 December 2014, at increasing rates for each portion of the price • Residential Properties: nothing on the first £125,000 of the property price 2% on the next £125,000 5% on the next £675,000 10% on the next £575,000 12% on the rest (above £1.5 million) 51 Stamp Duty Land Tax Rate
- 52. • Corporate bodies: SDLT is charged at 15% on residential properties costing more than £500,000 bought by bodies like companies and collective investment schemes Can be change in rates when the property is used for property rental business or property resale trade Residential leases: • If your residential lease premium (purchase price) is more than £125,000, you will pay 1% SDLT on the amount above the £125,000 threshold. 52 Stamp Duty Land Tax Rate
- 53. Stamp Duty LandTax Penalty: • within 3 months after the filing date the fixed penalty is £100 • more than 3 months after the filing date the fixed penalty is £200 Don’t file within 12 months, pay taxed-based penalty plus fixed penalty Tax based penalty can be up to the full amount of the tax due on the return • Reasonable excuse: • Event prevented filling return yourself • Event that prevented making arrangements for someone else 53
- 54.