Unit 30-LO2 Determine taxation liabilities for unincorporated organizations and individuals BTEC-HND LEVEL 4 & 5

Course: Pearson BTEC Levels 4 and 5 Higher Nationals in Business

The taxation liability for unincorporated organizations and individuals is different.

For unincorporated organizations, the liabilities are the expenditures of fewer receipts summarized in the balance sheet which gives a company’s net income or loss. This system is then used to compute their tax liabilities from an awful lot of foreign authorities such as PAYE, NICs, corporation tax, etc.

Individuals‘ taxes are computed from taxable incomes using percentages allocated for each type of taxation such as NHS (National Health Service in the UK), general income tax rates, councils taxes 1% levy on certain goods and services including alcohol at trade levels fixed by Excise Duty, etc.

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Unincorporated organizations

The tax liability of unincorporated organizations is often based on the amount of business that they have. This includes activities such as trade, economic development, and social welfare. 

The taxation authorities often charge the individual business owner a corporation tax on the taxable income that they receive as an unincorporated organization. The way this is calculated depends on whether the business receives any direct income from production, and how this is calculated.

Many unincorporated organizations are nonprofit and charitable entities. Some common characteristics of these organizations include limited liability, the ability to grant membership, and a measure of freedom in determining long-term courses for its own activities.

Unincorporated associations may also be formed simply to carry out family legal affairs or other matters that require a written agreement between relatives or other parties who do not intend to form an ongoing partnership.

Generally speaking, unincorporated associations will often have a voting structure where bylaws provide that membership has rights in proportion with their financial contributions.


Individuals liable to pay tax as a corporation spend income and earn profits. They pay regular income tax, while they also have to claim capital amount tax on their salaries, interest earnings, or rental income (which are viewed as soft income). When the individual receives actual cash remunerations in the form of wages or salary, there is no information available about those remunerations in monthly accounting transactions. To determine the taxable amounts, individual taxpayers must request an audit subject to certain taxes and penalties.

Personal taxation depends on the country, but it is what everyone will tax you on at their discretion. More specific questions should be directed to your local tax board or department of personal income.

Taxation relating to sole traders and partnerships is determined by whichever country’s laws apply in the geographical context in which they operate.

Generally speaking, many countries have a system where there is both individual-level taxation and company-level taxation in case of incorporation for such entities; here, again it would be important to consult your local department of partnership/companies law.

The characteristics of each type of taxation.

The three types of taxation are direct taxation, indirect taxation, and consumption-based.

Direct taxes are levied on income, wealth, production, and corporate profits.

Indirect taxes fall on goods consumed such as VAT (value-added tax).

Consumption-based taxes are paid at the point of sale or purchase such as excise duties which are charged on alcohol.

It would seem that out of all the three types of taxation it would be best to use a consumption type because it is quite easy to collect. In addition, if you increase the price people need to pay then they will have less money to spend off other things not necessarily needed in their life which helps our economy run more efficiently because there will be less frivolous spending going on.

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The implications on personal taxation for those trading as sole traders or as a partnership.

If the individual has a personal tax rate of higher than 30% and there is no joint tax return, then filing as a sole trader or partnership trader will save the individual 30% on their income. It could also increase the overall tax obligation up to twice what one would expect if they filed as an employee or worker.

For individuals with low incomes in industries such as self-employment, consulting and sales, this strategy can provide substantial tax savings benefits during periods of increasing taxable income while minimizing their future obligations when earnings decrease or business revenues decrease. Taxpayers who are not engaged in a trade or profession may have deductions that reduce total federal adjusted gross incomes to below $140000 for single taxpayers and $280000 for married taxpayers filing jointly, which result in federal taxable incomes below the amounts that trigger the self-employment tax.

However, some states impose a tax on the “unearned” personal income of an individual/sole proprietor regardless of whether their total income exceeds these thresholds and also have higher minimum deductions than the federal government, so this strategy may not provide any benefit for all individuals subject to state taxes.

The self-employment taxes are meant to ensure that people earning more than $128K in 2012 end up paying Social Security tax on all those earnings (at 6.2%).

Calculating taxation liabilities

“A company may, for a given year, reduce its total costs by using recognized models and formulae to take into account changes in allowances.

These calculations must be made on the actual figures from the current tax year.” –

  1. The Income Tax Act 1970 as amended
  2. Principal Methods of Assessment under Irish Tax Law as endorsed by Revenue Ireland
  3. Is not published
  4. Nor is it available on their website
  5. It can’t be done with any amount of certainty, which I suspect will make your question difficult to answer confidently.

There are three types of taxation in the United Kingdom. Contributory, Capital Gains and Inheritance Tax, and Corporation Tax.

Contributory tax is payable by employees to cover the National Insurance contributions deducted from their pay (or equivalent).

National Insurance is collected by HM Revenue & Customs (HMRC) on behalf of all UK employers. Employees who work abroad may also need to register with local Social Security authorities.

Contributions are split into two different categories: Class 1a and Class 1b contributions for those aged 16-59; Class 2 for those 60 or over.

The employment allowance can also reduce one’s cost of National Insurance if it falls below £155 per week in the definition of a ‘new starter’.

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