From June 2023 we will be introducing professional skills marks into Advanced Taxation. Find out more about how professional skills will be assessed in the ATX exam.
Section A questions in ATX will ask candidates to respond to the requirements using a particular format, for example a report, letter, memorandum or notes in preparation for a meeting.
Irrespective of the specific format required, the style, presentation and tone of a candidate’s response should be professional and flow in a logical way. The response should contain appropriate headings and sub-headings which aim to achieve good coverage of all aspects of the requirement in an organised and methodical manner. It should be clear and effective, both in terms of the language used and the calculations performed.
Another important aspect of the skill of communication is to ensure that the content is relevant to the requirements and adheres to any specific instructions which are given in the question. Due consideration should also be given to the appropriateness of the tools employed (i.e. use of spreadsheet versus word processing platforms) and the ease of referencing between them, if both are used to address a single requirement.
The professional skill of analysis can be demonstrated in ATX by the application of the underlying tax rules to the specific scenario provided. Question requirements will often call for an explanation of the consequences of one or more courses of action. Candidates will then need to demonstrate evaluation skills by providing a recommendation or conclusion, or by giving advice. Loss-making scenarios are a good example of how this skill can be tested; in such a scenario, analytical skills will be required in terms of determining all the available options to the loss making company, or individual. Candidates will often then be asked to evaluate each of them, and to conclude on the most suitable or beneficial relief(s). The conclusions reached should be supported by relevant data taken from the scenario and justified by reference to the specific position of the entity involved.
Due consideration should be given to the impact of any variables provided in the scenario; for example, more than one date may be given for the proposed disposal of an asset, or there may be uncertainty as to the structure which is to be adopted for a proposed acquisition, or whether a new venture will be operated as a company or an unincorporated business. Variables such as these should be identified and any differences clearly explained in the analysis which is performed.
As previously noted, the skill of evaluation will typically be demonstrated by way of a balanced appraisal to determine the impact of a course of action, for example, taking advantage of a particular claim, election or relief. This involves the application of reasoned judgement to consider relevant factors, decide which ones to prioritise and then come to a suitable and justified conclusion based thereon.
Demonstrating scepticism in ATX does not mean challenging all the information which has been provided. It should be clear to a well-prepared candidate where scepticism should be exercised. For instance, there may be gaps or uncertainties in the information provided which could affect the conclusions reached, or the possible recommendations which could be made. If relevant, these should be identified and explained. Not knowing, for example, the specific date of an acquisition, or a disposal, may make the availability of particular reliefs in connection with the transaction uncertain, and this would need to be pointed out.
Scepticism may also be tested by giving candidates the opportunity to challenge the expressed views or opinions of individuals (say a friend, colleague or relative) in the scenario with regard to a particular course of action, strategy to adopt or application of the tax rules. Clear direction will normally be given in the question that such challenges are expected, and where this is the case, candidates should ensure that they fully explain and justify their counter arguments, and alternative views.
All ATX scenarios are intended to be as commercially realistic as possible. They range from considering large groups of companies down to single individuals. Candidates are therefore required to understand what advice is, or is not, appropriate in such organisational contexts, taking care to ensure that any recommendations are practical, plausible and relevant to the given entity and its particular circumstances.
Commercial acumen does not therefore entail having a knowledge or awareness of tax issues which goes beyond the scope of the syllabus. Effective demonstration of this skill will involve candidates using information within the question scenario to provide realistic and commercial solutions to problems, taking into account any other relevant practical considerations. This could involve demonstrating an awareness of internal constraints relevant to a scenario. For example, if access to funds is a major concern for an organisation, the solution which achieves the greatest tax saving may not necessarily be the one that addresses immediate cashflow concerns and this should be pointed out in a candidate’s answer.
Candidates need to take a considered forward-looking approach, recognising the possible consequences of past and future actions and that a course of action may have multiple impacts, so that the right choices can be exercised. This also means focussing on time limits for claims and elections such that, from a tax perspective, choices may still exist with regard to transactions which have already occurred.
Commercial acumen may also involve demonstrating a broad awareness of the purpose behind a particular area of legislation (e.g. legislation introduced to combat tax avoidance) or the wider consequences of a particular course of action beyond the immediate transaction under scrutiny; as an example, identifying that, under UK tax rules, once an election has been made to exempt from UK tax the profits of a foreign branch, this tax treatment applies to all foreign branches of that company.
Short videos from the ACCA examining team to give an overview of each professional skill and how it is assessed in the Advanced Taxation exam
Analysis and evaluation