A taxing time

Nov 02, 2020
At the marking centre, it was interesting to see how closely the CAP1 Tax Republic of Ireland and Northern Ireland papers performed and how the marking teams consistently saw the same common errors across both papers. Philip Nicolls speaks with both examiners to glean some advice for future candidates.

The 2019/20 examinations cycle saw a significant change in the CAP1 syllabus, with Law moving to an on-demand e-assessment and an expanded tax syllabus assessed by a full, three-hour paper. Despite maintaining a healthy pass rate, some candidates clearly found the new syllabus and longer paper quite a challenge. 

What impact has the change in Tax syllabus and paper had on candidates sitting in Summer 2020?

Northern Ireland examiner (NI): First, congratulations to the almost 600 Tax ROI and Tax NI candidates who passed their CAP1 tax exam. Well done for staying focused through COVID-19 restrictions, remote working and the move to e-assessment.

One of the key impacts of the syllabus change is that candidates now need to understand the four different taxes at CAP1: income tax, corporation tax, capital gains tax and value-added tax. While most candidates were able to differentiate between the various tax heads, a significant number did not understand that each different tax head has its own rules in terms of application and administration. While there may be an interaction between the taxes in some cases, they are ultimately separate and distinct regimes.

Republic of Ireland examiner (ROI): Absolutely, candidates sitting the Tax ROI paper made the same mistakes.

Because of the longer paper, we can examine candidates on a wider range of topics from the Competency Statement. In many cases, students scored well on the basic computational elements of a question but were unable to develop or apply their answers further. A significant number of candidates clearly had not prepared for particular topics and performed poorly as a result. 

Can you give me an example of those two issues from the summer paper?

NI: Of course. When determining the rate at which an individual pays UK capital gains tax, it is necessary to consider the amount of taxable income for income tax purposes that person has received in the tax year. However, the tax rates which are applied to any capital gain are the capital gains tax rates. Similarly, the due date for payment will be different under capital gains tax rules than under income tax rules.

ROI: In part one of the income tax computation, some candidates correctly calculated that a loss was incurred and were able to discuss how that loss could be applied but were unable to correctly apply the loss in the tax computation. Also, in the capital gains tax questions, the basic computational aspects were generally well answered, but the subtleties around marginal relief, wasting chattels or foreign taxes paid were not. 

Other questions that candidates seemed ill-prepared for included corporation tax payment dates for large companies, the exception for being a proprietary director, and the rules around help to buy incentive relief.

It is important for candidates to ensure that all aspects of the syllabus are studied. While many score reasonably well on the high-level concepts, candidates need to earn marks across the depth and breadth of the Competency Statement to be confident of a pass.

What one practical piece of advice would you give candidates sitting in November?

NI: It is fundamental that students understand the administrative rules of each tax head. The rules do differ, and it is imperative that candidates at this level know, and can explain, the relevant payment dates, filing dates, potential penalties for infringements, etc., for each tax. Summarising this type of information for each tax head is a valuable revision tool. Something as simple as being able to state when a liability or tax return is due is often a way to pick up easy marks in this exam.

ROI: Make sure you include your workings for computations, and also an explanation, if required. For example, explain why you made an add back or deduction in the calculation of taxable profit. This seems to be one area of exam technique where candidates have slipped in the move to e-assessment. Workings allow the examiner to award marks for adopting the correct approach, even if there are errors in the calculations. Often these ‘method marks’ are the difference between a pass and a fail for marginal candidates. Don’t be tempted to do your workings on the scratch paper. Make sure you input them as part of your answer.

Detailed commentary from examiners is presented in the PEC report, which is available on the examinations area of the Chartered Accountants Ireland website.