Ch 77: Direct Taxation




77.1 Introduction

Laws relating to taxation are often very complicated, and are subject to frequent changes. Specific advice from a taxation specialist may be required in individual cases where the matter is complex and/or is subject to differing opinions amongst the involved parties.


77.2 Her Majesty's Revenue and Customs (HMRC)

HMRC was formed on 18 April 2005, following the merger of the Inland Revenue and HM Customs and Excise.

HMRC collects direct taxation (paid by individuals or businesses on income earned or capital gained) and indirect taxation (paid on money spent on services or goods).  HMRC also pays out and administers tax credits.


77.3 Direct taxation

Direct taxation is the term for the taxation payable on income earned or capital gained. The following are the forms of direct taxation:  

  • Corporation Tax.
  • Income Tax.
  • Capital Gains Tax.
  • Inheritance Tax.
  • National Insurance Contributions.

Information on the current rates of taxation can be found on the HMRC website, Historical rates and allowances can be found at More detailed guidance on particular tax issues may be found in the HMRC internal manuals which can be found at or in the HMRC leaflets issued to the public, which can be found at


The chapter is divided into parts as follows:

Part 1 - Corporation Tax (paragraphs 77.4 to 77.18)

Part 2 - Income Tax generally (paragraphs 77.19 to 77.23)

Part 3 - PAYE (paragraphs 77.24 to 77.29)

Part 4 - Income Tax Self Assessment (paragraphs 77.30 to 77.38)

Part 5 - National Insurance Contributions (paragraphs 77.39 to 77.43)

Part 6 - Partnership taxation (paragraphs 77.44 to 77.48)

Part 7 - Tax Credits (paragraphs 77.49 to 77.52)

Part 8 - Capital Gains Tax and Inheritance Tax (paragraphs 77.53 to 77.58)

Part 9 - Assessments, appeals, distress and refunds (paragraphs 77.59 to 77.62)

Part 10 – Correspondence, claims and proofs of debt (amended September 2012) (paragraphs 77.63 to 77.108)


In addition, information and guidance are contained in the following annexes (inserted September 2012):

Annex A – Local tax office bankruptcy letter

Annex B – Local tax office official receiver company liquidator letter

Annex C – Local tax office insolvency practitioner voluntary liquidator letter


The following abbreviations are used in this chapter:

DWP - Department for Work and Pensions

HMRC - Her Majesty's Revenue and Customs

ICHU - Insolvency Claims Handling Unit 

ICTA88 - Income and Corporation Tax Act 1988

PAYE - Pay As You Earn

NIC - National Insurance Contributions

NICO - National Insurance Contributions Office

SERPS - State Earnings Related Pension Scheme

S2P - State Second Pension Scheme


[On to Part 1 - Corporation Tax]