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Brave new tax world

A comprehensive understanding of tax rules and strategy, and the skills to apply it, are crucial to becoming a competent, professional ICAEW Chartered Accountant

You will be expected by your employer and your clients to be aware of the key issues in tax legislation, how they impact on the business and how legislation should be applied. Tax legislation has grown significantly over the last few years, and the recent changes to the ACA qualification have seen two new tax modules introduced at the Professional Level: Tax Compliance and Business Planning: Taxation. Compliance and planning are the two key competency frameworks required in the tax regimes around the world.

Tax Compliance

The Tax Compliance module requires you to demonstrate that you understand the rules for individuals and companies to be compliant with their legal responsibilities in dealing with the preparation of tax computations.

Key issues

You will be tested on your ability to understand tax rules and apply them in real life scenarios. You will be assessed across seven taxes and asked to “calculate”, “state” and “explain” tax issues. You will need to be able to perform a variety of tax calculations under exam pressure.

How to approach the questions

You must have the fundamentals at your fingertips. Become familiar with your tax tables, know how to use them and devise a method to memorise the various proformas for the different taxes so you can reproduce them quickly and accurately on your exam script.

Legal and ethical issues may be tested in any of the four questions. If you were to review exam questions you will realise that applying ethical judgement is not just about distinguishing between tax avoidance and tax evasion. There are many other things to consider relating to fundamental principles, conflicts of interest and regulatory issues.

Business Planning: Taxation

While the Tax Compliance module focused on your technical knowledge, the Business Planning: Taxation paper is a skills-focused paper, which relies on the knowledge brought forward from the Tax Compliance and Principles of Taxation modules.

Key issues

Business Planning: Taxation requires you to learn some advanced technical topics, such as the treatment of losses, group scenarios and international taxation issues. Since this module has a skills focus, make sure you read through the skills development grid, which is available in the exam resources area at icaew.com/dashboard

You will now be required to “recommend” “determine” “analyse” and “evaluate”, in addition to supporting your tax advice through the use of relevant calculations and appropriate communication styles.

This module, in particular, asks you to apply your professional judgement. Specific examples may include:

  • applying scepticism to the integrity of information provided in the scenario having regard to its source;
  • selecting between technical choices;
  • identifying omissions in the information; 
  • evaluating inconsistencies in information;
  • evaluating the effects of future events;
  • identifying key linkages between information provided in a scenario and possible tax treatments;
  • comparing the effects of a range of estimates, outcomes or tax treatments;
  • exercising your own ethical judgement in assessing the consequences of various courses of action.

You are also required to think about the interaction of taxes and how this should be addressed from a technical viewpoint. For example:

  • does a gift that is efficient for inheritance tax purposes create a capital gain?
  • can that gain be mitigated?
  • how should this be communicated to the reader of my response?
  • is my response appropriate, given their circumstances?

This article originally appeared in the October 2013 edition of VITAL.