BUU33730 Taxation II Assignment Example TCD Ireland

Ireland is one of the most tax-friendly countries in the world. It has a low corporate Income Tax rate of 12.5%, and a low personal income tax rate of 7.65%. In addition, Ireland has a zero-rated national sales tax, which is the second-highest in the European Union after Denmark. All this makes it an ideal place to do business, and it’s also been named one of the happiest countries in the world by Forbes.

One of the main reasons for Ireland’s attractiveness as an investment location is its highly educated workforce. As well to home-grown talent, many multinational companies have chosen to set up operations in Ireland, which has led to high demand for graduates in a variety of fields.

Ireland is also home to several higher education institutions such as Trinity College Dublin and University College Dublin. These institutions are internationally recognized, and they regularly rank among the top 200 universities in the world according to the Times Higher Education World University Rankings.

Get Solved Assignment Samples for BUU33730 Taxation II Module

In this unit, there are many types of assignments given to students like individual assignments, group-based assignments, reports, case studies, final year projects, skills demonstrations, learner records, and other solutions given by us.

In this section, we are describing some Activities. these are:

Assignment Activity 1: Compute and explain issues about taxes on capital gains, including advanced issues such as the taxation of development land and share transactions.

The taxation of capital gains can be a complex issue, depending on the type of asset that is being sold and the circumstances surrounding the sale. Some key factors that are considered include:

• The length of time that the asset has been held (the “holding period”)
• The reason for the sale (e.g. was it a personal sale or a business sale?)
• Whether the asset is considered “development land” or not
• The difference between the purchase price and the sale price (the “gain”)

There are also various tax concessions available for capital gains, such as the 50% concession for assets held for more than 12 months. It’s important to seek professional advice to ensure that you are maximizing your entitlements under the tax legislation.

Some common issues to consider when dealing with capital gains include:

1. Personal assets (e.g. a holiday home)
2. Business assets (e.g. shares in a family company)
3. Development land (i.e. land purchased for development into residential property and then sold at a significantly higher price)
4. Primary production land (i.e. land used for farming purposes and then sold at a significantly higher price)
5. Shares or other securities (i.e. companies are taxed on capital gains when they sell their shares)

Taxation of Capital Gains – Personal Assets

If you have recently sold your home for a profit, you may be wondering how much tax you will need to pay on that money.

Since 1 July 2017, if you sell your home (e.g. family home or main residence) and make a capital gain before the end of the financial year in which it was sold, then the income is not taxable (if certain conditions are met).

If you sell your main residence after the 31st of May 2017, any capital gain made is not taxable. However, if it was purchased before 21 September 2015 and you have owned it for less than 12 months, then 50% of the profit will be subject to tax at your marginal rate.

From 1 July 2019 onwards, if you sell your home and the total gain on the property is less than $250,000 (for individuals) or $500,000 for those who are eligible couples or families), then that income is not taxable.

These changes only apply to “taxable” homes. If you have a holiday home that has been rented out, then it is not a “main residence” and the income from its sale would be taxable. If the holiday home is also your main residence, then you may be eligible for certain concessions.

Taxation of Capital Gains – Business Assets

If you are involved in a business or are self-employed, then it is important to understand the taxation implications when selling assets that are used for this purpose. These rules can vary depending on whether the asset sale is related to the business or not.

If an asset is not used for business purposes (e.g. equipment used exclusively in a holiday home) and it has been held for less than 12 months before being sold, then 50% of the profit will be subject to tax at your marginal rate (i.e. you pay twice the amount of tax that you would on an equivalent salary or wage).

If the asset is used for business purposes, it is deemed to have been held for 12 months if any part of it was used in a business during the period. The profit made is then calculated by deducting the original purchase price from the sale price. If this profit is not taxable, then you may be eligible for the 50% concession. If half or part of that gain has already been taxed (e.g. by claiming depreciation) then you will need to include it in your business income at item 20 on your tax return (supplementary section).

It is important to keep comprehensive records of all capital gains you make, including supporting documentation. If you are audited by the ATO then this will help to demonstrate that you have not made any mistakes or missed anything.

It is worth noting that if an asset has been used both for business and personal use (not at the same time), then only 50% of the capital gain is taxable if the item is sold after the 1st of July 2018.

Taxation of Capital Gains – Development of Land

If you have recently sold development land that has been used for this purpose, then it is important to be aware of the taxation requirements. The gain from selling this type of asset is calculated by deducting the original purchase price from the sale price and then capitalizing any expenses incurred during the construction process.

If the total capital gain made after development is less than $750,000 (or $1.5 million for those eligible couples and families), then that income is not taxable. If you have owned the asset for 12 months or more, this amount decreases to $250,000/$500,000 respectively.

From 1 July 2019 onwards, any capital gain made from selling development land is not taxable if the total gain is less than $100,000.

The rules for obtaining a full or partial exemption on your development land can be complex and you should seek advice from a taxation adviser before making any decisions.

Taxation of Capital Gains – Resources and Agricultural Assets

Certain primary production assets are tax-exempt when they are sold. If you have made a capital gain from selling any mining, quarrying, or prospecting right, then that income is not taxable.

From 1 July 2018 onwards, any loss made on the sale of certain fishing rights can be offset against your other assessable income for the year.

If you have ever owned assets that are primarily used for primary production then it is important to have a clear understanding of the rules so you know how much profit you can make without being taxed.

Taxation of Capital Gains – Other Assets

If you own assets that do not fall into one of the above categories, then you will need to refer to a comprehensive list of the guidelines to determine if any of the profit is taxable.

The ATO has created some useful examples on its website that detail how to calculate these amounts for various types of assets (e.g. car, household goods, personal use property). You can also access a comprehensive list here.

If you hold shares in a company or trust, then the gain or loss on disposal of those is not taxable (in most cases). However, if you make a capital gain from selling any shares that have been bought in the last 12 months for personal use then that income must be included in your tax return.

It is important to note that rental properties are only exempt when they are bought and sold as a business asset. If you sell your home or buy and sell within 12 months as an investment (e.g. not for profit), then those transactions are not exempt from taxation.

The ATO has also outlined the taxation of capital gains made by minors – which are usually exempt if they have made less than $416 from a sale.

Assignment Activity 2: Understand the Capital Gains Tax reliefs available including the conditions required to avail of such reliefs and events that may trigger a clawback of the reliefs.

To avail of any of the capital gains tax reliefs available, you must meet certain conditions. The most common reliefs are for long-term investments and primary residences, but there are also reliefs for entrepreneurs and business owners.

For long-term investments, you must have owned the asset for at least 12 months before selling it to qualify for the relief. If you sell it within 12 months, then you will be taxed at your normal rate. The 12-month rule does not apply if you sell the asset as part of a winding-up or bankruptcy process.

The rules for primary residences are a little more complex. In general, you can claim a full exemption from capital gains tax on any sale if you owned the property for at least 6 of the last 12 months before selling it. However, if you did not live in the house for long periods during that time (e.g. renting it out while you were away) then the ATO may allow a reduced exemption amount of $250,000/$500,000 depending on how much of the time you were living in it.

Once you have owned for at least 12 months, normal tax rates apply if you sell within 5 years (for primary residences) and 12 months (for other long-term investments).

Assignment Activity 3: Understand the detailed operation of the capital allowances regime in Ireland, the expenditure which qualifies for tax relief, and how the relief is calculated.

The capital allowances regime in Ireland provides for tax relief on qualifying expenditures incurred by a business. The relief is calculated by reference to the amount of the expenditure which is written off for tax purposes in any given year.

Qualifying expenditure includes expenditure on plant and machinery (new and second-hand), certain fixtures and fittings, computer software, motor vehicles, and scientific equipment. In most cases, the full cost of an asset can be claimed as a deduction against profits in the year in which it is purchased or acquired. There are some exceptions, however, notably about motor vehicles where only a limited percentage of the cost can be claimed each year.

There are also some restrictions on the amount that can be claimed as a deduction for motor vehicles. In general, capital allowances for cars cannot exceed certain limits. For example, allowances cannot exceed 45% of the profits before tax in any one year or 110% of the previous year’s allowance.

In addition to plant and machinery assets, there is also a separate capital allowances regime for certain other assets, including fixtures and fittings. The rules governing this are complex so you should enquire with your tax adviser if you plan to claim these expenses.

Assignment Activity 4: Understand the taxation of partnerships.

A partnership is a business structure in which two or more people come together to operate a business. Each partner contributes something different to the partnership, such as money, skills, or knowledge. There is no limit to the number of partners that can form a partnership.

Partnerships are not taxed as separate entities; instead, the income and expenses of the partnership are passed through to the partners and taxed on their tax returns. This pass-through taxation system is why partnerships are popular among small business owners– it’s simple and easy to file taxes for a partnership.

Each partner is responsible for their share of the partnership’s debts and liabilities. If one partner defaults on their responsibilities, the other partners can be held liable.

An unincorporated association is similar to a partnership, but it doesn’t have some of the formalities that partnerships do.

Assignment Activity 5: Understand the basic principles of corporation tax, including the tax residency rules for companies.

There are a few basic rules that all companies need to understand when it comes to corporation tax. The first is that the company must be resident in a country to be liable for tax on its profits there.

The second is that a company’s profits are taxed at the corporate rate of the country in which they are resident. This means that, even if a company operates in several countries, it will only be taxed on its profits in the country where it is resident.

Finally, companies can claim relief from taxation on certain types of income and expenditure, such as capital allowances and R&D expenditure. It’s important to understand these reliefs if you want to make sure your company pays the least amount of tax possible.

Assignment Activity 6: Prepare corporation tax computations for companies with a range of income sources.

Computing corporate taxes can be a complex process, especially for companies with a variety of income sources. The first step is to determine the taxable income for the company. This is done by subtracting all the allowable deductions from the company’s total revenue.

Some common deductions include the cost of goods sold, depreciation, wages, and interest payments. Once the taxable income is determined, it is then multiplied by the appropriate tax rate to find the amount of corporate tax owed.

There are a variety of tax rates depending on the size and structure of the company. Companies with higher incomes are typically taxed at a higher rate than those with lower incomes.

It is important to note that these are just general guidelines. You should always research the specific rules for your company’s native country.

Assignment Activity 7: Calculate the reliefs available to companies and groups of companies for losses.

There are several reliefs available to companies and groups of companies for losses, including the following:

1. Capital Allowances: Companies can claim capital allowances on qualifying assets. This allows them to deduct the cost of the assets from their taxable profits.
2. Group Loss Relief: A group of companies can relieve losses incurred by one company within the group against profits made by other companies within the group. This prevents profits in one company from being taxed twice.
3. ITC (Industrial and Commercial) Property: Companies can claim tax relief on expenditure incurred on qualifying industrial and commercial property.
4. Research and Development Expenditure: Companies can claim a deduction for research and development expenditure against their taxable profits.

Assignment Activity 8: Understand the international aspects of certain Irish tax policies and make comparisons between Irish tax law and international equivalents.

Comparisons between Irish tax law and international equivalents can be difficult as, on the whole, Ireland is a very low tax jurisdiction. However, there are key considerations that warrant examination.

Corporate tax in Ireland is 12.5%. This compares to a statutory corporate tax rate of 35% in the United States and a global average of 22.5%. This relatively low rate has been an attractive proposition for multinationals looking to establish a European base and has resulted in Ireland becoming known as a ‘tax haven’.

In terms of personal taxation, the Irish income tax system is progressive with rates ranging from 0% to 41%. The top marginal rate of 41% applies to income over €33,800. This compares to a top marginal rate of 45% in the UK and a global average of 35%.

Furthermore, while capital gains tax is charged at 33% in Ireland, the corporate tax rate on chargeable gains for companies is just 10%.

The Irish VAT system operates on a standard rate of 23%, a reduced rate of 13.5%, and an exempt trade regime. The standard rate of 23% compares favorably to a global average VAT rate of 20.6%.

Ireland also has some specific allowances and reliefs that make the tax system more attractive for companies operating in Ireland, such as agricultural concessions; insurance companies concessions; petroleum extraction concessions; venture capital schemes; trading stock relief; film tax credit regime; and High Potential Start-Up Relief.

Assignment Activity 9: Understand the ethical and professional issues facing tax practitioners, including the distinction between tax evasion and tax avoidance.

Tax evasion is the unlawful attempt to avoid paying taxes by hiding income, assets, or expenditures. Tax avoidance, on the other hand, is the lawful use of tax laws to reduce a taxpayer’s taxable income.

There are many legal tax-avoidance strategies available to taxpayers. For example, taxpayers can make charitable contributions, invest in municipal bonds, or purchase life insurance policies. While some people may characterize all tax avoidance as “illegal,” the reality is that most tax avoidance is perfectly legal. However, there are a few limited areas where tax avoidance can cross over into illegal territory. For example, if a taxpayer uses a sham transaction to avoid paying taxes, that would likely be considered illegal tax evasion.

The distinction between tax avoidance and tax evasion is very important. Tax evasion is the intentional failure to report income or to claim deductions or credits, to reduce taxable income. Tax avoidance, on the other hand, is the legal use of tax laws to reduce one’s tax liability.

Assignment Activity 10: Understand the system of Revenue audits, appeals, and disputes.

Revenue audits, appeals, and disputes involve the examination of a taxpayer’s financial records to ensure that all income has been reported and that the appropriate taxes have been paid.

If an audit reveals that additional taxes are owed, the taxpayer may dispute the findings and appeal the decision. If the dispute cannot be resolved through negotiation, it may be necessary to take legal action.

The goal of any revenue audit or dispute is to ensure that taxpayers pay their fair share of taxes while also providing taxpayers with due process and a fair hearing.

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