Foundations in Tax Quiz 1

Corporation tax is a direct tax on the turnover of companies.

• False

• True

National insurance is a direct tax suffered by employees, employers and the self-employed on earnings.

• False

• True

Inheritance tax is a direct tax on transfers of income by individuals.

• False

• True

Value added tax is a direct tax on the supply of good and services by businesses.

• False

• True

You are a trainee Chartered Certified Accountant and your firm has a client who has refused to disclose a chargeable gain to HM Revenue and Customs (HMRC). From an ethical viewpoint, which TWO of the following actions could be expected of your firm?

• Reporting under the money laundering regulations

• Advising the client to make disclosure

• Informing HMRC of the non-disclosure

• Warning the client that your firm will be reporting the non-disclosure

Which of the following is the correct definition of an extra-statutory concession?

• A provision for the relaxation of the strict application of the law where it would lead to anomalies or cause hardship

• Supplementary information providing additional detail in relation to the general principles set out in legislation

• HM Revenue and Customs' interpretation of tax legislation

• Guidance provided to HM Revenue and Customs' staff in interpreting and applying tax legislation

Which of the following statements correctly explains the difference between tax evasion and tax avoidance?

• Both tax evasion and tax avoidance are illegal, but tax evasion involves providing HM Revenue and Customs with deliberately false information

• Tax evasion is illegal, whereas tax avoidance involves the minimisation of tax liabilities by the use of any lawful means

• Both tax evasion and tax avoidance are illegal, but tax avoidance involves providing HM Revenue and Customs with deliberately false information

• Tax avoidance is illegal, whereas tax evasion involves the minimisation of tax liabilities by the use of any lawful means

Eva's income tax liability and class 4 national insurance contributions (NIC) for the tax year 2015-16 are £4,840. Her income tax liability and class 4 NICs for the tax year 2014-15 were £6,360. What is the lowest amount to which Eva could make a claim to reduce each of her payments on account for the tax year 2015-16 without being charged interest?

• £4,840

• £0

• £3,180

• £2,420

Rajesh is a sole trader. He correctly calculated his self-assessment payments on account for the tax year 2015-16 and paid these on the due dates. Rajesh paid the correct balancing payment of £1,200 for the tax year 2015-16 on 30 June 2017. What penalties and interest may Rajesh be charged as a result of his late balancing payment for the tax year 2015-16?

• Interest of £15 only

• Interest of £36 only

• Interest of £36 and a penalty of £60

• Interest of £15 and a penalty of £60

For the year ended 30 June 2014, Forgetful Ltd had a corporation tax liability of £166,250, which it did not pay until 31 July 2015. Forgetful Ltd is not a large company. How much interest will Forgetful Ltd be charged by HM Revenue and Customs (HMRC) in respect of the late payment of its corporation tax liability for the year ended 30 June 2014?

• £1,801

• £2,909

• £5,403

• £1,662