Chief Assessor’s report

NVQ/SVQ in Accounting
Level 4
Preparing Personal Taxation
Computations (PTC)
2003 Standards / Diploma pathway
Diploma level
Preparing Personal Taxation
Computations (PTC)
2003 Standards

June 2008

General comments

This paper was challenging in that a thorough understanding of benefits in kind was needed, together with the different aspects of capital gains tax that can be assessed. Generally, formats used by students are improving, and standard of written answers was high. However, there was evidence in this paper of over-reliance on text books, especially in the first two tasks.

Section 1

Task 1.1

There were three benefits that needed to be calculated in this task. Generally, the answers to the accommodation were adequate, but with two recurring errors. First, too many candidates used an official rate of 5%, instead of the correct rate, as shown in the tables on page 3, of 6.25%. It is assumed that this rate of 5% is used as an example in some textbooks, but students must ensure that their knowledge is more up to date. The second error was in the calculation of the number of months. April to October, inclusive, is clearly seven months, but many candidates either used six months, or allowed for the full year.

These two errors continued into the calculation for the loan. Therefore a common wrong answer was £7,000 x (5% – 3%) x 6/12. This means that half of this answer is wrong, with the loss of valuable marks.

Many candidates knew that the van had no chargeable benefit, and the calculation of £300 was mostly correct.

Task 1.2

The specific answer looked for in this task was the total of the employment income. It would appear that too many candidates were unclear as to what exactly constitutes employment income. Typical errors included not time apportioning the salary for seven months, including the trading profits and not deducting the occupational pension payment. The redundancy income of £20,000 caused some confusion, but if candidates included it in the income, they only lost a small amount of credit. Any redundancy payment below £30,000 is exempt from tax, hence the amount received by Bruce was not taxable.

Task 1.3

By using their own figures from tasks 1.1 and 1.2, most candidates gained full marks in this task. Virtually all of them correctly grossed up the building society interest and the dividends.

Task 1.4

Again, by using their own figures from task 1.3, the vast majority of candidates gained full marks for this task. If they had income that reached into the 40% bracket, then they needed to correctly include the private pension payments, but most handled this well.

The only issue between tasks 1.3 and 1.4 was that some candidates found the difference between the two pensions confusing in their correct treatment. This is understandable, as it can be a tricky area, but students must ensure that they fully comprehend the two types of pensions, and their respective tax treatments.

Task 1.5

A very straightforward tax return needed completing here. Generally, there were no issues with most candidates gaining high, or full, marks.

Task 1.6

Traditionally, students do not like written questions. However, this e-mail was generally very well answered. This could be due to the topic area, with candidates having detailed knowledge of the technical aspects, but the language and communication skills also tended to be acceptable.

Most candidates understood about the accruals basis, the difference between revenue and capital expenditure, and the wear and tear allowance of 10%. It should be noted that the model answer is in more detail than a candidate would be expected to provide to gain full marks.

Section 2

Task 2.1

This task is not dissimilar to task 2.4 in the December 2007 exam, except that this task is easier. This seemed to make little difference to the range of weak answers that were provided. As in December, many candidates decided that this property was totally exempt. As it had been unoccupied for part of the ownership time, this may give rise to a chargeable event, and that is what the candidates needed to assess.

It would appear that those candidates who wrote one sentence at the top of the page, stating that the property was exempt from capital gains tax, had failed to read my report from the December exam. In both cases, every candidate should have been able to calculate the gain with no difficulty, therefore gaining reasonable marks.

The number of months that were exempt was quite straightforward, although students regularly have difficulty in working these out. Here, far too many candidates decided that the full period of ownership was 11 years. Students must work in months for PPR, and not round years. Also, 1 January 1996 to 1 June 2007 is 11 years and 5 months, not 11 years and 6 months. Students really must be more careful in exam situations.

Task 2.2

This was a straightforward bonus issue task, with the vast majority of candidates gaining full marks. The only recurring error was the failure to apportion the cost, wrongly deducting the full £9,010.

Task 2.3

Again, this was very straightforward, with virtually all candidates gaining full marks. Weaker students apportioned the proceeds between the rights issue and the original shares, showing two pool-like calculations, but this was not too common.

Task 2.4

This task should have been the easiest of all, but many candidates became confused about what should be £6,000. A loss of £2,000 was common, with students taking £4,000 proceeds and £6,000 cost. Some students did the 5/3 computation and used that figure as a gain instead of the loss.

Task 2.5

The format used by candidates in this task improves with every exam. What does not improve is the calculation of the taper relief percentages. A significant minority got all three wrong, the commonest being 65%, 75% and 90%. It seems to be a general trend that candidates cannot handle dates, as also discussed in tasks 1.1 and 2.1. This can be very disappointing, as it can be an expensive mistake in terms of total marks awarded.

Aside from that, the vast majority of candidates handled the losses effectively, although too many added them together before applying the relief. It is important that students demonstrate understanding of the order in which losses are treated.

Task 2.6

As ever, part (a) saw the vast majority of candidates gaining full marks. Part (b) varied in terms of quality of answer, with a higher than usual number of students using 22%. As commented on in previous reports, a significant number of candidates fail to give the date of due payment, which is generally asked for at each sitting.

Task 2.7

This was a very straightforward task, aimed to finish off the exam nicely, with a question that all students can do. It is no surprise that virtually all candidates gained full marks here.

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