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Income Tax and Corporation Tax in the United Kingdom - Essay Example

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Masters
Essay
Finance & Accounting
Pages 15 (3765 words)

Summary

The researcher of this essay aims to examine the main rules that govern Income Tax and Corporation Tax in the United Kingdom. It outlines the main components of these taxes and the obligations of the taxpayer in fulfilling his obligations to HMRC…

Extract of sample
Income Tax and Corporation Tax in the United Kingdom

The paper tells that historically, taxation in Britain was collected from serfs who paid rent to their landlords in return for protection. However, in the 1600s, a unified land law was passed which vested control and power to the Crown. Land and property taxes were collected from each landowner to support the government. In the 1800s, income tax was introduced, first to support wars and eventually, to support the UK government's deficit. Currently, Her Majesty's Revenue & Customs (HMRC) is in charge of collecting taxes in the United Kingdom. There are several types of tax that are payable periodically by certain entities in the UK. They include Income Tax, Corporation Tax, Duties on goods and services, National Insurance Contribution, Value Added Tax and Fuel Duty. All these taxes have different laws and guiding principles. This tax is levied on the profits of businesses. Corporation tax is calculated on the annual income of a business. It was first introduced in the Finance Act 1965. Corporation tax in the UK is currently regulated by the Income & Corporation Tax and its subsequent amendments. According to Sections 6 and 11 of the Income & Corporation Tax Act (ICTA), corporation tax must be paid by three main groups of entities:
1. UK resident companies. This include companies that are incorporated in the UK.
2. Non-resident companies in the UK carrying out trade through a permanent establishment and
3. Unincorporated bodies which are not partnerships that fall within the scope of the tax like societies and voluntary associations.


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