Taxation Resources

The following resources all relate to taxation and are a collection of website's which may be of interest to users of our site. As taxation is a very broad category this part of the site is where you will find information on non specific and / or related topics.

DEFINITION OF TAXATION:

The imposition of taxes; the practice of the government in levying taxes on the subjects of a state

The calculation and agreement of the amount of tax due to the Government whether by individuals or by business entities.

A compulsory transfer of money (or goods) from private individuals, institutions or groups to the government. It may be levied upon Wealth or Income, or in the form of a surcharge on prices. In the first case, it would be called a direct tax; in the latter, an indirect tax. Taxation is one of the principle means by which a government finances its expenditure

TAX: charge against a citizen's person or property or activity for the support of government

TAX INCOME : government income due to taxation

DOUBLE TAXATION: Double taxation is a situation in which two or more taxes must be paid for the same asset or financial transaction

Corporations are treated as a separate legal taxable entity for income tax purposes. Therefore, corporations pay tax on their earnings. If corporate earnings are distributed to shareholders in the form of dividends, the corporation does not receive the reasonable business expense deduction, and dividend income is taxed as regular income to the shareholders.

This is what may happen when a person domiciled in country A works in country B. Tax will be deducted in B, and the same income may also attract tax liability in country A. Many countries have tax treaties (agreements), so that provided the Inland Revenue is informed of the tax already paid on income, it will not be deducted again.

When profits are taxed twice. Corporation pays taxes on the profits and the shareholder pays taxes on the dividends.

Taxes paid twice, once abroad where income is earned and a second time in the United Kingdom , if the company is UK owned. A principle of tax law is that double taxation should be avoided. If the UK company has already paid taxes abroad, it should only pay enough taxes in the United Kingdom to bring the overall rate up to the UK rate.

DEFERRED TAXATION: 

Is a tax liability for the future arising from capital allowances or revaluation of assets. It is a long-term liability and forms part of the company's capital employed.

Deferred taxation is calculated using the balance sheet liability method, based on temporary differences, and represents the potential future liability for taxation in respect of items which are recognised for income tax purposes in periods different from those during which they are brought to account in the financial statements, except differences relating to goodwill and revaluation of property.

Taxation which, owing to the operation of tax legislation, is payable in a year later than that in, which the profit to which it relates, was recognised. This arises because of so called timing differences between accounts prepared for tax purposes and those prepared for reporting purposes.

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