[Solved] Kieran’s Tax Liability and Advanced Personal Taxation Case Study


Advanced Personal Taxation Assignment Answer all four parts of the advanced personal taxation assignment. Part One – Self-Employed Tax Calculation. Kieran has started his own business, runs a bookshop (“KSN Books and Cards”), and has asked for your help regarding his tax affairs. Your month and year of birth will trigger the gross profit amount […]

Part 2: Reporting of Chargeable Gains

According to the United Kingdom (UK) tax laws and regulations, an individual must report and pay for capital gains. Hence, Kieran’s failure to report the chargeable gains realized from the disposal of his property adversely puts his accounting firm at risk of facing the provisioned legal outcomes, with the country’s legal system penalizing the offender according to the nature of their offenses. In particular, the UK law recognizes three criteria employed in determining the penalty to be charged: deliberate and concealing, deliberate without covering, and non-deliberate. For the non-deliberate offense, the taxpayer fails to inform the tax authority of the circumstance that leads to tax liability, although the failure is not deliberate. On the other hand, deliberate without concealing a misdemeanor denotes a situation. At the same time, the taxpayer fails to disclose the chargeable gain deliberately and does not take steps to hide the tax liability. Finally, deliberate and concealing charges involve intentionally failing to notify the authority and trying to cover the liability.

Therefore, according to Kieran’s situation, he fails to disclose the chargeable and fails to conceal the gain, meaning that his offense falls under the deliberate without covering offense. In particular, Kieran deliberately neglects the chargeable gains even when prompted by the tax authorities since he believes he has other avenues of discovering the chargeable gains. Consequently, Kieran’s penalty range ranges from 5% to 70% of the tax liability against the potential lost tax revenue (“Penalties for Failure to Notify”). Similarly, the accounting firm faces a 30 – 70 penalty percentage of the potential lost tax revenue, neglecting to report their client’s deliberate failure to report the chargeable until prompted by the HM revenue and customs authority.

Part 3: Impact of Taxes and Tax Planning- Financial Act 2018

Tax planning plays a significant role in the taxpayers’ decision-making outcomes considering the financial impact of the different categories and alternatives. For example, tax planning contributes heavily to an individual’s determination on whether to remain employed or consider self-employment as an alternative, as the liability associated with both states impacts personal expenses. Remuneration packages also affect tax liability outcomes as individuals mostly regard the employment incentives provided in making decisions. Therefore, the tax plan enables informed decision-making on the business medium that minimizes tax liability to enable outcome optimization, significantly affecting the bottom line.

In particular, the move from sole proprietorship to partnership undertakings becomes well-informed when undertaken with a consultation with a tax plan. In particular, the management needs to incorporate tax filing outcomes in the short-and long-term planning process, enabling them to make an informed judgment on the fiscal impact it has on the corporation. Finally, tax planning enables an entrepreneur to devise a pension contribution in a profit extraction strategy, which facilitates tax-free consequences for employees’ contributions and employer deductions, thus achieving profitability. Therefore, evaluating the debt and equity financing on tax helps determine the financing strategy that will help minimize the tax expenses.

Question 4: Importance of an Individual’s Domicile Status

A domicile status denotes an individual’s legal recognition as a permanent resident of a particular jurisdiction. In particular, a domiciled state applies even after a person leaves a nation if they maintain or demonstrate the intent of permanent residency in the confines of the country’s law. An individual’s domicile state impacts tax outcomes, as it determines the degree of deductions owed to the government compared to a residence status.

Notably, an individual domiciled and residing in the UK gets all their foreign and domestic income taxed in the country (Finney 72). On the other hand, the government provisions non-residential UK citizens and non-residential, non-domiciled UK persons not to pay taxes on foreign-gained earnings (Finney 71). Similarly, while the UK-domiciled standing means that an individual owes the United Kingdom government foreign- and domestic-gained taxes from an inheritance, an overseas-domicile UK resident only attracts local assets’ inheritance tax (Finney 69-73). Additionally, when an individual stays in the United Kingdom for more than fifteen years or was initially born in the country but gained citizenship in another country, they are deemed domiciled in calculating their income and inheritance tax (Finney 71). Hence, deemed domicile denotes a time-specific, non-UK domiciled person or a UK-born, foreign-country citizen eligible for specific tax obligations that correlate with the domicile’s tax liability. Therefore, an individual’s domicile status significantly affects the tax amount owed to the government.

Part 1: Kieran’s Tax Liability Computation

Works Cited

Finney, Malcolm James. Wealth Management Planning: The UK Tax Principles. John Wiley & Sons, 2010.

“Penalties for Failure to Notify.” HM Revenue & Customs, www. assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/877263/CC-FS11.pdf. Accessed 18 Apr. 2020.


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Published On: 01-01-1970

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