At 90%, Self Assessment Taxation has the highest pass mark of all ICB exams. This is because, when it comes to taxes, it’s vital to get everything right first time.
SAT Exam - Conquering the beast
Taxation is complex, whether it’s VAT, income tax or corporation tax. You need an analytical mind to handle each situation, and each new budget announcement means a taxpayer’s position has to be reassessed.
Why is this exam so hard?
It is relatively easy to answer to this question! Every situation is different so you cannot really practise a certain type of question, rather you have to learn how to apply the rules. One tiny detail, for example the emissions of a purchased car, can alter the tax payable creating a knock-on effect on income tax payable, payments on account, NI contributions and even the following year’s capital allowances.
How to prepare?
- Study all general rules in-depth; there are many of them
- Investigate – familiarise yourself with HMRC manuals, basic pages and collection sites to gain additional knowledge. Your most used manuals will be:
BIM Business Income Manual
CA Capital Allowances
EIM Employment Income Manual
PIM Property Income Manual
- Ask, ask, ask – it is highly recommended that you get help from a training provider where you can ask questions and take advantage of the additional resources such as practice workbooks, live demonstrations (webinars) and online communities.
How to attack the complex exam questions?
Wording is everything so make sure you read the questions very thoroughly; every single word has a bearing on the tax position:
- First examine the taxpayer’s personal circumstances such as age and location
- Look at the structure of the income sources; establish the hierarchy of non-savings, savings and dividend income and don’t forget to look out for exempt income!
- Categorise the expenses/costs as per the SA helpsheets, booklets and notes to calculate the trading profit or income from property to be able to enter them in the correct box. For employees check BIK against the EIM and Booklet 480!
- Highlight everything that needs special attention such as:
Capital – Revenue expenditure
Private use element
Capital Allowances (qualifying expenditure for FYA, AIA, WDA)
Generally disallowed items (depreciation, entertainment, own taxation, drawings, goods for own use, certain donations, etc.)
Tax saving items and reliefs (simplified expenses, replacement of domestic item relief, rent-a-room relief, etc.)
- Apply the Personal Allowance, Personal Savings Allowance and Dividend Allowance, not forgetting possible restrictions on them!
- Get the income tax bands right with possible use of the starting rate for savings! Always use the full income tax computation template even if it seems easy to calculate!
- Assess the taxpayer’s position for NI Contribution purposes, double-checking the age!
- Double-check for arithmetical errors to avoid cascade or knock-on effect errors
- Use the available 48 hours available
The underpinning vast knowledge
Although the underpinning knowledge questions represent just 1-2% each, in total they take up almost the entire threshold for passing the exam! Without doubt, students often find them tricky and spend a considerable amount of time investigating the solution. Familiarity with the above mentioned manuals, helpsheets and booklets is imperative to successfully answering these questions.
In previous Tutor Tips I have mentioned the benefits and rewards of completing this qualification. Without doubt all the effort will definitely pay off and it might be just a little sooner than you think!
It is my personal mission to prepare students for real life so through IDEAL Schools I present a LIVE online submission demonstration of the HMRC platform from registration as an Agent to filing a Tax Return. This will ensure that you are FULLY prepared for that first client submission! Come join us here: https://www.idealschools.co.uk/diploma-in-self-assessment