Taxation Quizzes for Sixth Form Accounting Students

Question 1

For calculating taxable profit, which of these expenses is NOT allowed?

Accepted Answer

Charitable donations

Answer

Rent paid on business premises

Answer

Bad debts written off

Answer

Depreciation on business assets

Question 2

How might a significant increase in the UK corporation tax rate affect investment decisions made by businesses operating in the UK?

Accepted Answer

Reduced UK investments due to lower profit margins

Accepted Answer

Relocation of operations to countries with lower corporation tax rates

Answer

Increased UK investments to take advantage of tax incentives

Answer

No change in investment strategies as corporation tax is not a major factor

Question 3

How does the UK tax system contribute to the government's economic and social goals?

Accepted Answer

The tax system is designed to support economic growth and reduce social inequality.

Answer

The tax system mainly aims to raise revenue, with limited focus on economic or social objectives.

Answer

The tax system primarily focuses on environmental protection and sustainability.

Question 4

What is a potential negative effect of a progressive tax system?

Accepted Answer

Reduced motivation to work or invest

Answer

Higher government income

Answer

Lower income inequality

Answer

Faster economic growth

Question 5

Question:

How do tax incentives influence investment decisions and contribute to economic development?

Accepted Answer

Tax incentives can influence investment decisions and promote economic development by attracting capital, fostering innovation, and encouraging entrepreneurship.

Answer

Tax incentives have no significant impact on investment decisions, as businesses focus on market factors.

Answer

Tax incentives stimulate investment but do not directly affect economic development.

Answer

Tax incentives are only used to attract foreign investment and are not relevant to domestic businesses.

Question 6

Progressive tax systems are often praised for their ability to reduce income inequality. However, one potential downside is that they may:

Accepted Answer

Discourage work effort and investment

Answer

Promote economic growth

Answer

Increase government revenue

Question 7

What is the primary purpose of the personal allowance in the UK income tax system?

Accepted Answer

To reduce the tax burden on low-income earners.

Answer

To encourage individuals to work and earn more income.

Answer

To fund government spending on public services.

Answer

To simplify the tax system for all taxpayers.

Question 8

Which of the following accounting methods is used to calculate taxable profits for corporation tax purposes in the UK?

Accepted Answer

Accruals basis accounting

Answer

Cash basis accounting

Answer

Modified cash basis accounting

Answer

Historical cost accounting

Question 9

What is the main distinction between direct and indirect taxes?

Accepted Answer

Direct taxes are based on income, while indirect taxes are based on spending.

Answer

Direct taxes are levied on individuals, while indirect taxes are levied on businesses.

Answer

Direct taxes are progressive, while indirect taxes are regressive.

Answer

Direct taxes are less efficient than indirect taxes.

Question 10

Which of the following is NOT a type of direct tax in the UK?

Accepted Answer

Value-Added Tax

Answer

Income Tax

Answer

Capital Gains Tax

Answer

Corporation Tax

Question 11

What is the key difference between direct and indirect taxes?

Accepted Answer

Direct taxes are based on income, while indirect taxes are based on consumption.

Answer

Direct taxes are paid by businesses, while indirect taxes are paid by individuals.

Answer

Indirect taxes are paid by businesses, while direct taxes are paid by individuals.

Answer

Indirect taxes are based on income, while direct taxes are based on consumption.

Question 12

Value-added tax (VAT) is a tax on:

Accepted Answer

Goods and services

Answer

Income

Answer

Profits

Answer

Investments

Question 13

Which of the following is NOT an advantage of using a personal allowance?

Accepted Answer

It increases the amount of National Insurance contributions you pay.

Answer

It reduces the amount of income tax you pay.

Answer

It allows you to earn more money before you start paying income tax.

Answer

It is available to all UK taxpayers.

Question 14

The UK tax year runs from:

Accepted Answer

1 April to 31 March

Answer

1 January to 31 December

Answer

6 April to 5 April

Answer

1 July to 30 June

Question 15

According to the United Kingdom tax system, which act is considered the primary legislation governing income tax?

Accepted Answer

Income Tax Act 2007

Answer

Finance Act 1970

Answer

Value Added Tax Act 1994

Answer

Corporation Tax Act 2009

Question 16

When considering expenses for corporation tax purposes, which expense is ineligible for deduction?

Accepted Answer

Dividends distributed to shareholders

Answer

Wages paid to employees

Answer

Rent for business premises

Answer

Bad debts written off

Question 17

Categorize the fundamental difference between direct and indirect taxes.

Accepted Answer

Direct taxes are based on income, whereas indirect taxes are based on consumption.

Answer

Direct taxes apply to businesses, and indirect taxes apply to individuals.

Answer

Indirect taxes are progressive, while direct taxes are regressive.

Answer

Direct and indirect taxes are identical in nature.

Question 18

How does corporation tax impact the profitability of a business?

Accepted Answer

Impact varies based on tax liability and profit margin

Answer

Reduces profitability by escalating expenses

Answer

Increases profitability by lowering revenue

Answer

Has no effect on profitability

Question 19

Which statement best reflects the ethical concerns surrounding tax avoidance and tax evasion?

Accepted Answer

Tax avoidance and evasion prioritize individual interests over collective well-being and societal obligations.

Answer

Tax avoidance is acceptable as it reduces tax liability within the law.

Answer

Tax evasion is justified if individuals or businesses perceive the tax system as unfair.

Answer

Ethical considerations in tax avoidance and evasion are irrelevant as long as taxes are paid.

Question 20

Which characteristic does NOT apply to direct taxes?

Accepted Answer

Based on the taxpayer's consumption

Answer

Imposed on the person who ultimately bears the burden of the tax

Answer

Cannot be transferred to another person

Answer

Generally progressive, meaning the higher your income, the higher the tax rate

Question 21

What is the standard rate of value-added tax (VAT) in the United Kingdom?

Accepted Answer

20%

Answer

15%

Answer

25%

Answer

30%

Question 22

Which of the following is NOT an advantage of filing your tax return online?

Accepted Answer

Ability to submit physical copies of tax forms

Answer

Quicker processing time

Answer

Access to online tax calculators

Answer

Automatic confirmation of receipt

Question 23

Which of the following is considered a capital gain?

Accepted Answer

Profit made from selling shares

Answer

Interest earned on a savings account

Answer

Rent received from a property

Answer

Salary earned from employment

Question 24

When does the tax year run from in the United Kingdom?

Accepted Answer

6th April - 5th April

Answer

1st January - 31st December

Answer

1st July - 30th June

Answer

1st October - 30th September

Question 25

In designing tax policy, which ethical consideration should be prioritized?

Accepted Answer

Fair distribution of tax burden

Answer

Maximizing government revenue

Answer

Simplifying tax regulations

Answer

Enhancing economic efficiency

Question 26

Which of the following is a type of corporation tax relief?

Accepted Answer

Research and development tax relief

Answer

Capital gains tax relief

Answer

Inheritance tax relief

Answer

Income tax relief

Question 27

What is the key difference between direct and indirect taxes?

Accepted Answer

Direct taxes are based on income or wealth, while indirect taxes are based on spending.

Answer

Direct taxes are paid directly to HMRC, while indirect taxes are paid to businesses.

Answer

Indirect taxes are paid directly to HMRC, while direct taxes are paid to businesses.

Answer

Indirect taxes are based on income or wealth, while direct taxes are based on spending.

Question 28

Which of the following is considered a tax avoidance scheme?

Accepted Answer

Using a tax haven

Answer

Investing in a pension

Answer

Claiming tax relief for charity donations

Answer

Maximizing your ISA allowance

Question 29

Identify the feature that is NOT a characteristic of income tax in the United Kingdom:

Accepted Answer

Regressive tax system

Answer

Progressive tax system

Answer

Determined by residency

Answer

Deductible expenses

Question 30

Which item is zero-rated under VAT in the United Kingdom?

Accepted Answer

Books

Answer

Food

Answer

Fuel

Answer

Clothes

Question 31

What is the primary purpose of progressive taxation?

Accepted Answer

To reduce the tax burden on low-income earners

Answer

To generate revenue for government spending

Answer

To incentivise economic growth

Answer

To penalize high-income earners

Question 32

What is the main purpose of value-added tax (VAT)?

Accepted Answer

To generate revenue for government spending

Answer

To control inflation

Answer

To promote economic growth

Answer

To discourage consumption

Question 33

Which characteristic does NOT apply to income tax in the United Kingdom?

Accepted Answer

Proportional

Answer

Progressive

Answer

Direct

Question 34

What is the standard rate of VAT in the United Kingdom?

Accepted Answer

20%

Answer

17.5%

Question 35

Which transaction is exempt from VAT?

Accepted Answer

Educational services

Answer

Sale of goods

Question 36

Which of these is a taxable benefit-in-kind?

Accepted Answer

Company car

Answer

Bonus payments

Question 37

What is the primary purpose of double taxation relief?

Accepted Answer

To prevent individuals from paying tax on the same income in two different countries

Answer

To encourage investment in developing countries

Question 38

Which of the following characteristics does NOT apply to income tax in the UK?

Accepted Answer

Indirect

Answer

Progressive

Answer

Direct

Answer

Self-assessment

Question 39

Which of the following transactions is exempt from VAT in the UK?

Accepted Answer

Medical services

Answer

Sale of food

Answer

Purchase of a new car

Answer

Construction of a new building

Question 40

The primary purpose of taxation in the UK is to:

Accepted Answer

Raise revenue for the government

Answer

Regulate the economy

Answer

Provide social welfare benefits

Answer

Encourage economic growth

Question 41

Which of the following taxes is considered a direct tax?

Accepted Answer

Income tax

Answer

Council tax

Answer

Value-added tax (VAT)

Answer

Road tax

Question 42

Individuals with a taxable income below the personal allowance threshold must pay:

Accepted Answer

Zero income tax

Answer

Income tax at the basic rate

Answer

Income tax at the higher rate

Answer

Income tax at the additional rate

Question 43

Which of the following expenses is allowable when calculating a company's corporation tax liability?

Accepted Answer

Salaries and wages

Answer

Dividends

Answer

Capital expenditure

Answer

Personal expenses

Question 44

Capital gains tax is a tax levied on:

Accepted Answer

Profit made from selling certain assets

Answer

Income earned from employment

Answer

Property rented out to tenants

Answer

Dividends received from investments

Question 45

In the context of taxation, what is the term 'tax avoidance' commonly used to describe?

Accepted Answer

Legally reducing the amount of tax payable

Answer

Illegally reducing the amount of tax payable

Answer

Increasing the amount of tax payable

Answer

Claiming tax refunds that are not due

Question 46

What is the primary purpose of double taxation agreements?

Accepted Answer

To prevent individuals and businesses from paying tax on the same income in multiple jurisdictions

Answer

To ensure that individuals and businesses pay the maximum amount of tax possible

Answer

To provide tax incentives for businesses operating in multiple countries

Answer

To penalize individuals who attempt to avoid paying taxes

Question 47

Explain the ethical principles that guide tax professionals and discuss their importance in maintaining the integrity of the taxation system.

Accepted Answer

Confidentiality is crucial for safeguarding taxpayers' privacy.

Accepted Answer

Objectivity demands that tax professionals be impartial and unbiased.

Answer

Ethical principles are not essential in taxation.

Answer

Integrity is not a key ethical consideration for tax professionals.

Question 48

Which of these is NOT typically considered a benefit of a wealth tax?

Accepted Answer

Stimulated economic growth

Answer

Reduced wealth inequality

Answer

Increased tax revenue

Answer

Promoted social mobility

Question 49

Which of the following is a zero-rated item for VAT purposes in the United Kingdom?

Accepted Answer

Books

Answer

Clothes

Answer

Electronics

Answer

Food

Question 50

What is the personal allowance for income tax in the United Kingdom?

Accepted Answer

£12,570

Answer

£10,000

Answer

£15,000

Answer

£20,000

Question 51

What is the taxable value of an asset for capital gains tax purposes?

Accepted Answer

The sale proceeds less the original cost and any allowable expenses

Answer

The sale proceeds only

Answer

The original cost only

Question 52

The main purpose of the tax system in the United Kingdom is to:

Accepted Answer

Raise revenue for the government

Answer

Reduce social inequality

Answer

Control the economy

Question 53

Which of the following is a progressive tax?

Accepted Answer

Income tax

Answer

Corporation tax

Answer

VAT

Answer

Council tax

Question 54

Which of the following is NOT an allowable deduction for income tax purposes in the United Kingdom?

Accepted Answer

Personal expenses

Answer

Charitable donations

Answer

Mortgage interest payments on a principal private residence

Answer

Pension contributions

Question 55

Corporation tax is charged on a company's:

Accepted Answer

Taxable profits

Answer

Net profits

Answer

Gross profits

Answer

Turnover

Question 56

Which of the following is a method used to avoid double taxation on dividends?

Accepted Answer

Dividend tax credit

Answer

Value-Added Tax

Answer

Capital gains tax

Answer

Inheritance tax

Question 57

Which of the following is NOT a primary purpose of taxation?

Accepted Answer

To subsidize private businesses

Answer

To control economic activity

Answer

To raise revenue for the provision of public services

Answer

To redistribute income and wealth

Question 58

The term 'tax avoidance' refers to:

Accepted Answer

Legally reducing one's tax liability

Answer

Paying more taxes than required

Answer

Filing tax returns late

Answer

Illegally evading taxes

Question 59

Which type of tax is paid directly by the individual or entity that bears the burden of the tax?

Accepted Answer

Direct tax

Answer

Indirect tax

Answer

Progressive tax

Answer

Regressive tax

Question 60

Which of the following statements accurately describes a characteristic of corporation tax?

Accepted Answer

It is a tax levied on the profits of companies.

Answer

It is a tax levied on the revenue of companies.

Answer

It is a tax levied on the employees of companies.

Answer

It is a tax levied on the assets of companies.

Question 61

Which of the following is an advantage of using a tax calculator?

Accepted Answer

It helps to ensure accuracy and reduces the risk of errors in tax calculations.

Answer

It provides personalized tax advice and guidance.

Answer

It guarantees maximum tax refunds.

Question 62

What is the primary purpose of a P60 form?

Accepted Answer

To provide a summary of an employee's earnings and tax paid for a specific tax year.

Answer

To register an individual as self-employed.

Answer

To claim tax refunds.

Question 63

What is the main objective of filing a tax return?

Accepted Answer

To report income and expenses to the tax authorities, enabling them to calculate the correct tax liability.

Answer

To claim tax refunds.

Answer

To register for self-assessment.

Question 64

Value-added tax (VAT) is a tax levied on:

Accepted Answer

The consumption of goods and services

Answer

Income earned

Answer

Savings

Answer

Property ownership