Chapter 5 - Taxation of individuals

In exam always say: You should consult a tax expert 

Income Tax

• tax that is levied on an individual or trust's earnings
• There are three types of income tax:
  • Progressive - the amount of tax paid increases as the amount of earnings declared increases
  • Proportional - everyone pays the same flat rate of tax
  • Regressive - the tax rate falls as the amount of income subject to tax increases
• Most tax systems have a tax-free allowance for low-earners 

Capital Gains Tax

• paid when chargeable assets are disposed of at a value higher than their purchase price.
• there are some exceptions such as gifts between spouses and assets given away on death
• Losses made on disposals of chargeable assets can be offset against profits to reduce the tax payable - mix gains and losses to pay CGT altogether
• Taxable - property, land, personal possessions worth more than £6k, shares and securities
• Exempt - main residence, wasting assets e.g. cars, personal possessions worth less than £6k, investments held in ISAs, UK government bonds/gifts

Inheritance tax

• normally paid when people die
• Exempt Transfers: a spouse/civil partner, qualifying charities, National institutions
• Exemptions for some small gifts, gifts on marriage and regular gifts
• taper relief - the proportional reduction of the amount of inheritance tax due that is applied if a donor survives their gift by between three to seven years

Transnational Taxation

• Governments around the world have grown increasingly concerned by the threat of global tax evasion or aggressive avoidance
• EUSTD, FATCA, OECD CRS

EUSTD

• For EU residents
• The institution making the interest payment should collect data on the individual receiving the savings income
• That tax authority should advise the tax authority in the individual's country of residence

3 options for service providers:

• Retention tax option…