Taxation in the United Kingdom - Essay Example

Taxation XXXXXXXX XXXXXXXX XXXXXXXX XXXXXXXX XXXXXXXXX Taxation The United Kingdom income tax, has relatively changed over the years. Taxation in the United Kingdom has mainly involved, and revolved, around the issue of paying dues, to a doubtful minimum of two levels, which though different, lie in government. These include the central government, particularly the HM Revenue and Customs. This goes hand in hand with the government that operates locally. Central government revenues are generated mostly from the National Insurance and income tax. Similarly, contributions and other forms of taxes, namely corporation tax and value added tax also contribute greatly. Originally, there lay imposing of tax, on a persons income despite who was the beneficiary entitled to the income in question, but nowadays, an individual would owe tax on income to which he or she is beneficially the one entitled. Majority of companies bid farewell to the Income Tax Net in1965 when a tax form, namely corporation tax, was introduced. The Income and Corporations Taxes Act of the year 1970 firmed up, these changes (Esenwein, 2004, 98). The tax system put to practice in The United kingdom, has been condemned as costly and inequitable, and poses ready for reform in ways that could significantly increase peoples welfare and improve the performance of the economy. This is in accordance with a review from the Institute of Fiscal Studies. The Mirrlees Review brought together a high-profile group of international experts and incorporated younger researchers to identify the characteristics that would form the basis of a good tax system for any open developed economy in within the 21st century (Mirrlees, 2011, 102). This was in order to assess the extent to which the tax system in practice in The United Kingdom conforms to these ideals, and to offer further recommendations, on how it might realistically be reformed in that direction. The review recommends that, the rate structure for income tax should duly and accordingly be simplified and merged with National Income. At the same time, a single integrated benefit, ought to be introduced to replace all or rather most of the current benefits. The UK also has a highly complex array of welfare benefits, which are difficult for people to understand (Tiley, 2013, 145). These benefits impose high effective tax rates on some low earners. It states that, imposing two separate taxes on earnings, namely the income tax and the national insurance is unnecessarily difficult, and that recent changes have introduced a rare marginal rate structure that rose from 40% to 60%, and a drastic fall back to 40% before rising again to 50%. The review recommends VAT, also the value added tax, should be applied to nearly all spending to reduce complexity and avoid costly distortions to the consumption choices (Hotz, 2009, 176). This is as, the zero rate of VAT that was applied to many goods and services came under fire as expensive and highly inefficient. This was in matters regarding the way of helping people of low incomes. Citing an example, there involved charging a reduced rate of VAT on domestic fuel consumption that effectively subsidized energy use and encouraged carbon emissions. A great majority of systems refer to taxes paid indirectly. This includes those in the like of taxes, which are majorly laid within holding by payers of income, as credits rather than considering them as prepayments (Saunders, 2007, 101). In such cases, the tax credit is beyond no doubt can be refunded. The most familiar forms, which are greatly relevant of such amounts includes those the withholding amidst the payroll of income tax or PAYE, withholding of tax at source on payments to those who are unfortunately regarded as nonresidents, and input credits for value added tax. A tax credit referred to a sum, relatively removed from the total amount, which a particular taxpayer owes, or owed to the state. It would be granted for various types of taxes, such as property tax, Value Added Tax, or commonly. The VAT, or income tax (Mirrlees, 2011, 158). It would also be granted in recognition of taxes that were already paid, relatively as a subsidy, or with the aim to encourage investment or other mannerlisms. In some systems, tax credits are can be refunded to a level whereby which, they exceed the relevant tax. Tax systems may randomly grant tax credits to businesses, and individuals too, and accordingly, such grants vary by the type of credit. In the United Kingdom, the working tax credit and child tax credit are paid directly into the claimants bank account, and to the Post Office Card Account, for those using a relatively different procedure that is relevant to Post Office (Maxwell, 2006, 1forty three). In exceptional conditions, these can be paid by the famous giro. However, these payments may stop if at all account details are not provided. A minimum level of child tax credits is that can be paid to all individuals, group of individuals, or couples with children, up to a certain limit, putting to consideration, the party’s income. The real amount of child tax credits that a person may receive depends on several factors. This may include, the level of their income, the number of children they have, and other varying factors as well (Esenwein, 2004, 199). The Working tax credit is considered as a state benefit in the United Kingdom. This benefit is made to people who work on a low income. It is a part of the current system of can be refunded, or rather, non-wastable tax credits, that were introduced in April in the year 2003. This remains as a tested social security benefit. In addition, people also lay entitled to the Child Tax Credit, abbreviated as CTC if they are responsible for any children (Ladd, 2005, 242). CTC is, or rather, was paid to single low earners with or without children who are aged twenty five or over and are working over thirty hours per week and also to couples without children, at least one of whom is over twenty five. This provided that at least one of them was working for approximately thirty hours each week. If the claimant has children however, they may claim working tax credit from age sixteen upward. This also, was if they are working at least sixteen hours per week (Stock, 2010, 185). Taxation takes a completely new and different turn, when it comes to matters concerning stock prices. Accordingly, it is important that executives fully understand the income tax treatment of options and restricted stock in order to push to a maximum, the after-tax value. The rules regarding the taxation of stock options and restricted stock are complex. This revelation by research presents the basic tax rules that apply to stock options and restricted stock in matters concerning their relevant taxation procedures. However, it goes beyond the basics to discuss certain more complex issues and planning considerations (Hotz, 2009, 136). Throughout, there is reference of a hypothetical character, namely John in the review. He is an executive to a rather hypothetical company called, or termed to as The Public Company. This is in order, and concerning order that illustrates the various tax rules. For purposes of cash flow planning, it is important for an executive to understand the income tax withholding and employment tax obligations that apply to stock options and restricted stock (Stock, 2010, 199). It is with respect to International Organization for Standardization, abbreviated as ISOs. It requires that there is no federal income tax, which withholds requirement. Not even in a case whereby, the executive has a disqualifying disposition. In a much similar manner, no Federal Insurance Contributions Act taxes social security or the FICA rather Federal Unemployment Tax Act taxes. References Mirrlees, J. A. (2011). Tax by design: the Mirrlees review. Oxford: Oxford University Press. Business tax burdens VAT after all. 2005. Washington, D.C.: Tax Foundation. Esenwein, G. A. 2004. The child tax credit. Washington, D.C.: Congressional Information Service, Library of Congress. Hotz, V. J., & Scholz, J. K. 2009. The Earned Income Tax Credit. Cambridge, MA.: National Bureau of Economic Research. Ladd, H. F., & Oates, W. E. 2005. Local government tax and land use policies in the United Kingdom: understanding the links. Cheltenham , UK: Edward Elgar. Lupo, A. 2008. Tax systems of UK and Italy: a comparative analysis : International Fiscal Association bilateral meeting of the UK and Italian branches, Florence 2007. Milano: Egea. Maxwell, J. A. 2006. Tax credits and intergovernmental fiscal relations. Washington: Brookings Institution. Meyers, E. M., & Musial, J. J. 2007. Urban incentive tax credits; a self-correcting strategy to rebuild central cities. New York: Praeger. Saunders, M. R. 2007. International tax systems and planning techniques tax developments : summer 2007. London: International Fiscal Services. Short, J. 2005. Public expenditure and taxation in the UK regions. Farnborough, Hampshire: Gower. Tiley, J., & Loutzenhiser, G. 2013. Advanced topics in revenue law: corporation tax, international and European tax, savings, charities. Oxford: Hart Pub.. Smith, G. 2006. Principles and methods of taxation. London: J. Murray. Stock, T. 2010. Advances in taxation. Bingley, UK: Emerald. Read More