Tax regulations in the UK: penalties

December 29, 2022
Tax regulations in the UK: penalties

The tax regulation UK system can seem quite complex with many taxes and high rates, but the legislation also provides for tax reliefs and reductions.

Tax resident status is important in understanding how much tax you have to pay in the UK. UK tax residency is determined on the basis of several tests based on factual circumstances (time spent in the country, property ownership, work, family and other connections).

The most common:

  • Automatic test: you will automatically become a UK tax inhabitant if you spend at least half a year in the UK during the tax year.
  • Sufficient links test: your family, business and business links with the UK and the number of days spent in the UK can determine your tax resident status.

UK tax regulation

The use of one or another accounting technique, how much the most successfully found compromise between differently directed economic interests.

When the law clearly defines certain requirements for an accountant, then his professional judgments must coincide with the rules of law. The readiness of an accountant to follow the provisions of the law is determined only by the level of his qualifications. In these cases, the accountant always has the opportunity to defend his opinion. When the legislation does not establish a sufficiently clear legal framework for certain business processes, the professionalism of an accounting judgment can only be confirmed by a deep understanding of the interests of the owner, precedents, or pure creativity based on experience, intuition and morality.

One of the goals of professional judgment is to make the most optimal decision for economic judgment where there are different options. Here, first of all, it is necessary to be guided by the interests of the economic entity itself, putting at the forefront the principles for reporting, including its reliability and usefulness for making correct, timely management decisions. This is what is most important for the economic subject itself.

Professional judgment requires consistent compliance with the following criteria:

  • fulfillment of the requirements of the legislation (decision according to the law);
  • following the norms of morality (decision according to conscience);
  • Satisfying the interests of the owners (solution “according to concepts”);
  • the correct choice of solutions based on generally accepted accounting standards (experience, qualifications and creativity).

With the introduction of IFRS principles into domestic practice, the importance of an accountant’s professional judgment rises to a fundamentally different, higher level.

In general, it should be noted that professional judgment is an important tool for regulating accounting in the implementation of its main and fundamental goal: the formation of reliable and complete information about the financial condition and financial activities of an economic entity.

Peculiarities of taxation in United Kingdom

The UK tax regulation system has a number of differences from other countries, thanks to which Foggy Albion is often called a “tax haven”. Income taxes here are relatively low – and apply only to income received in the UK, but not in other states. Thus, the Convention on the absence of double taxation is in force between the Russian Federation and the United Kingdom: if taxes have already been paid in Russia, then the funds can be freely imported into the UK, there is no need to pay taxes a second time. This attracts a large flow of capital into the country.

Since 2015, the tax regulation in the UK has undergone a number of changes, and today non-residents must pay capital gains tax, which was previously only subject to citizens of the country. Also from April 1, 2015, the procedure for calculating capital gains tax on property worth more than £2 million has changed: now it is not a fixed rate, as before, but a progressive one, which can reach 12%. Experts note that the innovations did not stop investors: still wealthy citizens of many countries, including Ukraine, buy real estate here and move to the UK for permanent residence.

Inheritance tax

This tax also exempts most types of gifts made during the lifetime of the owner, if he remains alive after that for the last seven years. At the time of the transfer of property as a gift, no tax is charged, but if the owner dies within the last seven years, then the gift agreement is subject to tax. The tax rate is set at 40% of the amount of property worth more than £150,000. Art.

Taxation of companies

Corporate tax is applied to all profits received by resident companies during the tax year. A corporate body is considered a resident company if its activities are carried out and controlled in this country, i.e. the governing body of this company is located in this country.

Taxation of non-resident trusts in the United Kingdom in the company which trades in the country through a branch and is subject to corporation tax with:

  • income from trade;
  • income from property or property rights used by this enterprise (department);
  • capital gains from assets used by this department.

The company’s taxable income is calculated by deducting from the company’s gross income all legally permitted expenses incurred in the reporting tax year.

The forthcoming are subject to deduction from gross income:

  • current expenses of a business nature (rent, repair, modernization of premises);
  • compensation payments upon dismissal of workers and employees;
  • expenses for legal advice on the company’s finances;
  • representative expenses;
  • contributions to various funds (charitable);
  • overdue debts.

A special tax regime is established for companies that extract oil in the North Sea. These companies are not exempt from the general corporate tax and pay the petroleum corporate tax at the rate of 75%.

UK company tax regulations are also subject to capital gains tax. Non-resident companies do not pay this tax.

Taxation of trusts in the united kingdom

There is another tax that is paid by the local authorities and transferred to the state budget – the business tax. Until 1990, this tax was completely local, but now it has a regulated nature – the funds collected under this tax are redistributed from the state budget to the regions in proportion to the population.

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