#P6 – a tough nut to crack
• Pass rate: 38% (December 2014)
• Technical difficulty: 9/10
• Weighting of calculations: 40-50%
• Weighting of discursive elements: 60-50%
• Exam technique: 9/10
The syllabus
The P6 Advanced Taxation exam builds on F6 and requires more in-depth study of areas seen previously. There is a strong emphasis on application of knowledge to real life scenarios, on the interaction of taxes and tax planning. Communication of advice is also very important.
The P6 syllabus is broken down into four key areas:
A: Apply further knowledge and understanding of the UK tax system through the study of more advanced topics within the taxes studied previously and the study of stamp taxes: Although there are some new topics introduced at P6, it would be very hard to pass the exam based on these alone. A thorough knowledge of the F6 content is also vital. Students must have a sound understanding of the basics of income tax, corporation tax, capital gains tax, inheritance tax, VAT and national insurance. Questions often involve almost entirely F6 knowledge, but tested in a more advanced way.
Stamp taxes are the only new taxes introduced at the P6 level, but represent a very minor area.
There is no guidance provided by the ACCA on the weighting of different topics in the exam, except that every exam will include an ethical component for approximately five marks in section A. Breadth of study is, therefore, very important.
B: Identify and evaluate the impact of relevant taxes on various situations and courses of action, including the interaction of taxes: Most questions in the P6 exam involve more than one tax, often applied to the same transaction or transactions. For example, the gift of an asset during an individual’s lifetime may have implications for both capital gains tax and inheritance tax. It is important that students can distinguish between the different taxes, particularly in relation to the reliefs and exemptions available.
Questions may also require comparison of different options, for example: employed versus self-employed; setting up as a sole trader or a company; taking a company car or a cash alternative.
C: Provide advice on minimising and/or deferring tax liabilities by the use of standard tax planning measures: Tax planning is a key part of the P6 exam. Many questions will involve some sort of tax planning, especially the scenario questions in section A of the exam.
Popular tax planning areas include: planning for groups of companies involving both losses and gains; loss relief planning for sole traders; tax planning for married couples; inheritance tax planning. Advice on tax efficient investments such as the Enterprise Investment Scheme, Seed Enterprise Investment Scheme, venture capital trusts and pensions is often required in the exam.
D: Communicate with clients, HM Revenue and Customs and other professionals in an appropriate manner: As well as the practical application of tax rules to client scenarios, students are expected to produce professional documents incorporating helpful, clear advice. Question 1 in section A will require the answer to be presented in a particular format such as a report, memorandum or letter and will have four marks available in respect of professional skills. The use of headings and a clear, logical format will help to obtain those marks.
Sitting the P6 exam
The P6 exam requires a sound knowledge of the key rules and principles of all of the taxes as well as an ability to apply these rules to sometimes unfamiliar scenarios. Question practice is vital, as the application of the rules is a skill that is best obtained by experiencing as many scenarios as possible.
Good exam technique essential
Generally, the technical content of the compulsory questions in section A is more straightforward than that of the section B questions. Although students may prefer to start with the shorter section B questions, they must ensure that they leave enough time to fully answer section A, as this is often where the easiest marks are to be found.
The P6 examiner has noted that students tend to spend longer on the first question and seem to lack a sense of urgency, often resulting in poorer performance in later questions. Students should try to maintain their level of effort throughout the exam.
It is very important to read the requirement carefully, and answer only the question set. Revisit the requirement often to make sure that all parts have been attempted and nothing has been left out.
Finally, although the P6 syllabus may seem daunting, remember that only 50% is needed to obtain a pass.
• Helen Forster is a tax content specialist at Kaplan Financial
