Students should never rely on F6 exam tips from any source as exam success is based on a sound knowledge of the basic rules that underpin the computations required for each tax and the ability to apply this knowledge within the 3 hours and 15 minutes available.
This is based on considerable practice of past examination questions which have been updated for Finance Act 2011 and by sitting a mock examination in the allotted time. It can be of little surprise that students fail exams if the last time they sat such an exam was when they failed at the previous sitting!
If any of the areas tipped should appear then this, if you are prepared, should be a bonus – you should not be expecting these areas and then be disappointed when they do not appear and therefore be immediately at a psychological low in the exam room!
Be properly prepared through work effort, expect the worst but know if you do your best you will pass whatever exam is placed in front of you!!
Q.1 Income Tax / VAT
This question always requires the preparation of an Income Tax Computation for at least one individual, possibly two (spouses or civil partners) or even three taxpayers (members of the same family) The two main sources of income tested within the computation are Employment Income and the adjusted trading profits of the Self Employed. Interest income is frequently tested with examples of taxable interest received net and gross plus exempt interest and of course some dividend income.
A scenario involving a transition from employment to self employment part way through the tax year would allow both employment income with assessable benefits for part of tax year to be tested along with adjustment of profits and a capital allowances computation for a short or long opening period of account and dealing with pre trading revenue and capital expenditure. The adjusted profit would then be used to determine the assessments in the opening years of the new business and the computation of the overlap profits.
The changes to the pension contribution rules with the introduction of the Annual Allowance (AA) and AA Charge will probably attract the examiners attention in this year’s exams so should be understood – this could feature as part of Question 4 or 5 instead.
Class I NIC’s for the period of employment and or Class 2 and 4 NIC’s for the period of self employment could also be tested.
If VAT was included in such a question then it could test issues of VAT registration, submission of first VAT return dealing with pre registration input VAT and suitability of small business accounting schemes such as cash and annual accounting and the flat rate scheme.
Q.2 Corporation Tax / VAT
Will require the preparation of a Corporation Tax Computation for a Chargeable Accounting Period which will probably straddle Financial Years 2010 and 2011
e.g. Accounting Year Ended 31 December 2011 or 9 months to 30 September 2011.
A significant amount of marks are usually available for the adjustment of profit statement and Capital Allowances Computation. The company may be in a gains group. If VAT featured in this question it might include group VAT registration
Q.3 Chargeable Gains
If a question involves corporate gains rather than an individual then the main assets that a company may dispose of would include:
Properties – this may involve establishing the cost of the property from an earlier acquisition via a no gain no loss transfer from a fellow gains group member and/or the cost may have been reduced by a rollover relief claim at the time of acquisition. The gain arising may now also be deferred by a full rollover or partial rollover relief claim or if a depreciating asset is now acquired a holdover relief claim may instead be available.
Land – a part disposal of land
Chattels – e.g. a painting from the boardroom
Questions 4 and 5
IHT seems likely to be a regular feature of part of a question and it would seem likely that at some point the examiner will test the more difficult problem of CLT’s not only taking place within the 7 years before the date of death but there also being a CLT more than 7 years before death. This would not itself be chargeable on death but given the cumulative nature of IHT would impact on the transfers within the 7 years following it which do then become chargeable on death.
Groups if not tested in Q.2
Income tax loss reliefs and / or partnerships