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Contents
Answer 1:...............................................................................................................................................3
Answer 4................................................................................................................................................6
Answer 5 (Part A):..................................................................................................................................9
References:..........................................................................................................................................12
Answer 1:

In the 18th Century, Adam smith who was a scholar established certain rules to justify the
rationality of the taxation system from that time various taxes has come and gone and these
rules with updated criteria are used to analysed whether such taxes are good or bad taxes on
the merits established by these criteria. In this answer Value added tax and Corporation tax
will be discussed and analyzed whether they are good tax or bad taxes. Discussion are as
follows.

Equity:

This criteria indicates that the tax should be charged to payer in equal manner according to
their income level, in other words, proportionate part should be charged as tax on total profit.
If an organization or person earns more than he should require more payment as tax and if
earns less he would require to pay less amount of taxes (Freedman, 2022). This equity criteria
is also known as ability to pay criteria and the purpose of this principle to establish a system
in which only those person who have enough money to pay should pay the taxes otherwise
they should be ignored to tax charging purpose.

Value added tax: VAT always charge on value of item this tax doesn’t consider the ability of
person who is going to pay the taxes for example if an electronic item cost 1000 pound and a
person wants to use for personal purpose whether he earns less money in comparison with
other consumers of this machinery but he has to pay the same amount of tax on such item and
due to that reason this tax is considered bad for this tax criteria (Onesti, 2022).

Corporation tax: this tax system has designed in such a way that only those corporate who
earns money above the specified limit are required to pay on the total income. Apart from
that certain regimes are established for different categories of companies according to
purpose and due to that fact, this this tax is good according to this criterion.

Certainty:

This principle assures that tax should be transparent and clear to understand, any person who
is going to deal with specified activities should aware about that kind of taxes. Timing, payer
as well as method of payment should also be cleared at the time of levy of tax. This principle
has established to prepare the person for upcoming taxes so they can prepare their budget.
Transparency is also key characteristics of this principle where; tax could be determined by
referring certain things. Overall, this principle demands from tax system that

VAT: this tax is transparent as well as clear to understand because seller always includes the
amount of tax in sale price. Buyer collect this tax and deposit at certain date otherwise
penalty will be charged. So transparency and understanding part is clear, due to this reason
this this tax is good according to this criteria (Macey-Dare, 2022).

Corporation tax: this tax is also clear to the organization because it charged on total profit
after applying certain relaxation and a specific rates on profit level of organization and tax
become due after end of financial year but a reasonable period of time is provided to pay the
taxes. Every responsible person of corporate made aware about this liability at the time of
registration. So this tax is not only clear but also transparent in terms of rules and regulations
so it is a good tax for certainty principles.

Convenience:

This principle refers to simplicity of the tax system that allows to pay the tax with pre-
determined timing and place, where, it has to be paid by the payer. Overall, this principle
targets the convenience of the tax payment for taxpayers. In today’s time every tax system is
controlled and managed from online portal those are convenient and easy to use, where, user
can login and fill his details of taxes and after processing the data he can file the return by
paying required amount of taxes. When a person is required to pay taxes in only cash amount
he has to withdraw huge chunk of cash and carry at respective place to discharge its tax
liability this situation would considered bad for tax principle purpose but it was done way
before the digital revolution but now system is clear and convenient where software is
available for data management and systems are efficient to record the data and calculate the
tax liability efficiently (Zu,2022).

VAT: Tax system of United Kingdom has provided an efficient system for VAT payment
which allows data management, tracking of payment, wireless transfer, avoidance of cash
payment, less time consuming and certain other advantages that could expect from efficient
online tax portal. So after determining all these facilities it could be concluded that these
system is efficient for any type of organization and they don’t have to make high efforts to
off-set their liability. VAT system is convenient from these criteria of performance.

Corporation tax: this tax system is also efficient and prominent it is one step ahead because a
separate ministry handle the issues related to corporation and due to that an efficient and
convenient system that allows easy method to pay the taxes and discharge the liability. Tax
disputes are also solved through same portals. So, according to this criterion this tax system is
good but maintenance cost is high (Haines, 2022).

Economy:

This is the most significant principle and purpose of tax collection where government assures
the availability of funds for particular project and scheme and boost the economy by
providing robust infrastructure which is not possible without availability of funds. According
to this criteria tax is designed in such a way that it cost minimum to the people against the
facilities are providing by the government to the public. There should be no need for an
elaborate tax collection apparatus because the expense of collecting a tax should be small
rather than exorbitant, public offerings justify the tax payment because every tax is designed
to provide certain types of facilities to particular group of people.

VAT: this tax has imposed on belief that poor people expand less on luxury items on which
taxes are higher and VAT on regular use products are low and negligible. The purpose of this
tax is to provide basic infrastructure to the people by charging more from richest people that
assures that this tax system is good according to this criterion.

Corporation tax: this tax system is also boosting the economy by making robust infrastructure
to corporates apart from that certain facilities are also provided only to corporation by using
the tax collected from these facilities. Static budget also considers this tax as important pillar
and use to sustain the economy. Due to that reason this tax is good under this criterion
(Fadoul, 2022).

Summary of results:

After analysing both taxes from the above stated criteria it could be concluded that all types
of taxes justify their existence and purpose and in this digitalized era where each process is
systematic and convenient all taxes seems appropriate and good according to criteria,
however, criticism on all indirect taxes raise by the people but to counter this problem certain
regular use products covered under nil rate and lower rate category. So, it is concluded that
VAT, corporation tax as well as all other taxes are justified and reasonable on their place and
to reduce the problems certain actions regularly taken by the authority.

Answer 4

This is legal firm that will be created by the stakeholders, individuals, and shareholders for
generating the profit from the business. This legal entity will allow to enter the contact and
agreement be sued and sue for managing the physical assets, remit, transfer and take loan
from the banks and financial institutions. This legal entity will be formed by the authorized
person to the corporation authority of UK that is based on specified features and documents.
It decided the information of business conducted, total share issues, share value and other
business details. It is also base on different features and specifications that protect the owner
and related person of corporation (Jemala, 2022). This will be created the multiple person and
single person for conducting the business for the specified objectives and goals of the
company. It will be formed on the basis of non-profit and profit of the business that will be
earned by the corporation. Mostly Profit Corporation has been formed by the people for
conducting the business with specified goals and objectives of the organization. This
corporation will generate the profit and distributes to the stakeholders of the company. Profit
will be distributed on percentage basis that will be managed by the shareholders in the
corporation. In other hand, non-profit corporation will be formed as charitable purpose which
is based on social activities and cause. It includes the religious, charitable, educational,
scientific, and research and development purpose. These corporations will use the entire
profit and revenue for its objective which has been mentioned in the registered documents of
corporation. Mainly three types of corporation are formed as per nature, size, and tax purpose
which as discussed below

C Corporation: this is most important legal entity that manages the attribute of corporation.
This is single and individual entity corporation that receives the profit and taxed at individual
level instead of business level (Schröder, 2022). This is same as single entity level that is
taxed at single entity. This corporation will be taxed secretly form the individual owner of
business. This is mostly usable concept in which they take the sign of C Corporation for
income tax federal purpose. C Corporation will join the unlimited number of stakeholders
based on domestic and international shareholder from any country. In this concept United
Kingdome government check the profit and earning that distributed to the shareholder which
will be taxed as per government rules. It also taxed paid in corporate tax return and single
return as individual base.

S corporation: this is also same as C Corporation but it has some other disadvantages and
limitation on tax and regulatory rules purpose (Pinto, 2022). This legal entity will be formed
less than 100 shareholders that will not be taxed as a single taxpayer. This corporation will be
taxed on income as a business that will also prepare the income and financial position
statement as per normal business. This corporation will transfer the profit and share transfer
to the shareholders which will include in the personal return of the shareholders. This
corporation has power to transfer the losses, deductions, and credits to the shareholders of
company in their tax return for benefit purpose in personal income tax return. It will avoid the
double taxation system that provides the benefit of single tax on single income in the United
Kingdome. This corporation also follows the rules and laws of the state where registered
office is situated.

B Corporation: this is Private Corporation that provides the public benefit to the shareholders
of the company. This will fulfill the ethical norms, social norms and environmental
performance for developing the standard of business. This concept doesn’t provide the any
tax benefits to the shareholder and company as per United Kingdome laws and rules. This
company will build the relationship with customer that will fulfill the object of organization
in the environmental sector, social sector, and other sector for generating the highest profit in
the business

Non-profit corporation: this is charitable organization which has not motive to generate the
profit in the business. They will earn the revenue and use to such fund in the charitable
activities and causes for the public. This corporation is non-taxable entirety which pays zero
tax to the government. They also receive the donation, contribution, and revenue that will be
used for the religious purpose, educational purpose, and charitable purpose. In this concept
board appoints the single person who will take all the decision of the organization in the favor
of objects and organization. This corporation will depend upon grants, donations, and
charities from the public, government and corporate sector that will be used for public
welfare and health in the society. They also collect the private as well as government
donations that will be proper record and documents by the organization. These donations also
exempt from taxed because it will be used for the public welfare and benefits (Bennett,
2022).

Limited liability Corporation: this corporation is based on corporate structure and partnership
structure. This legal entity is based on limited liabilities of members that will protect to the
members for financial damages, losses, and causes of company. this is partnership structure
that is also separate legal entity where partners are the shareholders that manages the capital
in the corporation. This capital creates the limited liability to the shareholders for company
damages, causes and losses which is also responsibility of the shareholders in a normal
corporation. LLC will not be taxed because all the profits and losses will be distributed to the
partners of the Corporation that will be taxed in the individual tax return of the shareholder
and pay tax accordingly by considering the business income as a pergola income.

Charter Corporation: this corporation will be formed under special act and regulations of
Charter to the queen and king of country. They have conducted the business as per rules and
regulations of charter in the country. It includes the bank of England, British Broadcasting,
East India in the UK that manages the business of the specified goods and services in the
United Kingdome as per rules and regulations of the charter.

Sole Corporation: in this corporation series of individuals will hold the office and title of
government in the United Kingdome. This individual person manages the functions, duties,
responsibilities, hold, grant, take loans, and proper transfer of the government and state
office. It includes the Ministry of public health, agriculture, Bishops and post master that
conducted the public services on the behalf of government and state legislations. In this
concept all the capacities of the local offices will be managed by the single person that will
called successor.

Corporation aggregate: this corporation will be formed by the group of people for conducting
the business in the United Kingdome. This is spate legal entity that will manage the business
and decision independently from its member and members of group. These corporations will
continue be involved in the business after the death of its member for new joining of new
member in the corporate aggregate. It will also be formed in artificial form that will act as
legal terms and take necessary decision for the health business of corporation.
Answer 5 (Part A):

Despite a history of over 50 years the nature of capital gains tax is still unsettled that
indicates that the nature of assets keeps Changning over the years but the nature of capital
gains tax is still unsettled. To consider the reasoning behind this statement that certain
parameters and definitions, reliefs, and exemptions need to be discussed. These are as
follows.

Discussion regarding UK’s capital gain taxes:

If any person disposes, transfers gift and exchange the capital assets which will be taxable as
per capital gain of United Kingdome. This tax is based on resident of UK that will transfer
the assets to the other person on a consideration basis. This tax also is calculated if you will
sell the UK based assets to the other person (Mehboob, 2022). As per capital gain tax, Non-
resident person is also liable to pay tax on transfer of assets to the other person if the lives in
the UK. This contention is also describing in the Land and transfer act of United Kingdome.
Capital gain tax also provide the specific rules and regulation if he temporary lives in the UK
and temporary lived in outside UK more than five year in the any countries of the world. If
any person provides the gift and transfer assets at free of cost than this act will also be apply
to the individual person. UK government implements the special provisions and rules for gift
and disposal the assets at free of cost. This act will also be apply when divorce, dissolution
and separation of partnership is conducted in the United Kingdome. Personal possession and
personal disposal is also taxed by the capital gain act for a consideration basis. This tax also
exempt many assets that will not be taxed by the government because it will outside the
preview of capital gain tax. It includes the exempted assets which are private motor, private
bikes, private vehicles, gift for charity purpose, government securities, betting winnings,
prizes cash, ISA,s assets held and foreign currency for personal purpose. If the person will
sell the personal home in which he lives then it will also be exempt by the capital gain tax.
This exemption will not apply on second home person because it means that this home is
used for investment purpose and rented purpose by the person. If any person sells the share in
open market to the third party on consideration basis than it also be taxed by the capital gain
tax (Blundell, 2022).

Basis of Capital gain taxes:

All tax payers are required to file annual tax returns who have incurred any type of gains and
losses in financial year (S1, TGCA). Current CGT rate ranges from 18% to 28% according to
types of assets and period of holding. This rate was 30% from 1965 to 1987 but after that it
increases at the time of inflation to 40%. In era of 1997 to 2008 CGT rate was at lowest level
and charge on the basis of holding (Millett BTR Article, 2010). Charging section of CGT is
SQ TGCA, 1992 and it is charged on disposal of specified assets and according to that there
should be three instances to make a transaction taxable under CGT. First is that it should be
asset a liability transfer should not be covered under this definition (Delestre, 2022). Second
is disposal of assets that means it should be disposed by transferring and disposing. Third rule
is gain of a capital nature that means gain should be there whether negative or positive and
asset should have capital nature. Revenue nature item will not be covered here.

Discussion on tax reliefs:

Personal assets below amount of 6000 pound and cars (any value) are not covered under this
tax because they are not considered asset according to this tax and certain economic reasons
are also there to exclude these things this step is taken to simplify this tax and provide some
relief from taxes. This was also the criticism for these kinds of taxes. Section 263, excludes
the gains and losses of cars from taxes (Saez, 2022).

According to section 115 of TGCA Gilts those covered under qualifying corporate bonds are
not covered under this tax and not charged. Same treatment is designed for QCB under
section 117, however due to doubtful definition of QCB certain complexities have been
arisen (Weston vs Garnett, 2005).

Second foremost problem in this tax is that it coves gift those are above the specific amount
of arm’s length price. This section applies where consideration is not available due to
inherent problem but by using the arm’s length price this problem could be solved.

Discussion on deductions:
According to section 37 to 40 of TGCA there are certain deductions allowed to provide relief
to the tax payer and reduce the burden of this tax which generally criticises due to its
unreasonable charges but it has reformed by the authority to provide relief.

If income tax is charged on certain assets for transfer capital gain would not come in picture
to avoid the duplicity of taxes. If an expenses comes under revenue definition and reduce the
profit of organization than it would not become the part of cost of asset that ultimately cover
under calculation of capital gain taxes.

Discussion on reliefs:

There are three types of relief named rollover, holdover and principle private residence relief.
According to rollover relief provided under section 152 and 155 when a person swap old
asset against new asset chargeability of CGT doesn’t arise and no tax will be charged. Partial
apportionment is also allowed in this case. There are certain kind of assets on which this
relief is allowed which are stated in above-specified sections.

Holdover relief provided under section 165(1) of TGCA that specifies that business gifts
doesn’t come under chargeability of tax under capital gain taxes and these assets also covered
the trading assets and share-securities.

Entrepreneur relief applies where employer-employee relationship exists and transfer comes
under salary not CGT.

Section 222 of TGCA covers the transfer of residential house where other residential house
purchase by utilizing the money received by selling the residential houses, however, certain
conditions need to be satisfied to use this relief.

This question asks about why this tax is unsettled after making numerous amounts of updates
and reforms but still it is unsettled and criticise for treatment. So, after analyzing these
reliefs, deduction, exemptions and basis of CGT it could be concluded that CGT keeps
evolving over the period but still some problem is there and the reason of this problem is
changing nature of assets and transactions which generally not cover under taxes or covered
accidently which should not be covered according to basic principle of taxes. So, the
statement is correct.
References:

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Blundell, R., 2022. Top Income Inequality and Tax Policy-Richard Blundell (UCL & IFS) A
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Delestre, I., Kopczuk, W., Miller, H. and Smith, K., 2022. Top income inequality and tax
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