Case Study: Taxation
Sally Forth lives in the UK and is a marketing manager for a large corporation. Unfortunately, the company she
works for has asked for members of staff to volunteer for redundancy in a re-structuring programme. Should she
volunteer, Sally would receive a 50,000 lump sum from her employer. Sally would then use the money to start her own
business as a marketing consultant. She has a lot of contacts in the industry and believes that she could build a
successful business, although this might take several years. One of her concerns is what might happen if she were
to secure a job with another company. Another is what would happen if she wanted to sell the business or just cease
trading in the future.
Sally Forth lives in the UK and is a marketing manager for a large corporation. Unfortunately, the company she
works for has asked for members of staff to volunteer for redundancy in a re-structuring programme. Should she
volunteer, Sally would receive a 50,000 lump sum from her employer. Sally would then use the money to start her own
business as a marketing consultant. She has a lot of contacts in the industry and believes that she could build a
successful business, although this might take several years. One of her concerns is what might happen if she were
to secure a job with another company. Another is what would happen if she wanted to sell the business or just cease
trading in the future.
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What she is not very sure of is the UK taxation implication of starting her own business. Friends have said that
she may have to register with Companies House and that as long as she does everything in cash, she will not have to
worry about VAT or any other taxes. Another friend has said that if Sally starts a limited company, she will not
pay tax, as the company will pay it for her, but, she may have to pay National Insurance.
Assignment briefing
Required
Prepare a comprehensive written report, in Microsoft Word, for Sally Forth that addresses the personal taxation
consequences of her commencing self-employment as well as the general taxation principles and considerations
involved with her running a business and its subsequent development over time. This will include aspects of Capital
Gains, Inheritance and Corporation tax as they may apply to Sally in the future should she wish to dispose of her
business. Your report must include the subjects of National Insurance and VAT and how they will impact in this
instance. The administration and penalty regime for relevant taxes must also be examined. Wherever possible, your
discussion should include worked examples to illustrate principles, offer guidance and inform decision-making.
You will be expected to review and research the appropriate chapters in the Set Text, on-line sources and review
other texts & journals in the Hive library to develop your lecture/seminar knowledge and understanding.
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Learning Outcomes
1.Explain and appreciate the scope, operation and administration of the tax system as it applies to
- individuals
- and companies.
5.Investigate the VAT system and make decisions regarding registration for individuals and companies.
6.Understand how National Insurance complements the Income tax system and perform calculations for individuals and
companies.
Assessment Criteria
The following specific criteria will be used for this work:
1.Demonstration an understanding of the scope, operation and administration of the tax system and how it applies to
- individuals
- and companies
2.Advise how VAT will impact the business or individual
3.Understand how the National Insurance system complements the Income Tax system and demonstrate this with examples
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