The aim of P6 (IRL), Advanced Taxation is to ensure that candidates can provide clients with the information that they require regarding the impact that the major Irish taxes may have on their financial decisions and situations.
This exam builds on the knowledge and skills acquired at the F6 level, and introduces new taxes such as capital acquisitions tax and VAT on property. It is essential that candidates have a good working knowledge of the taxes examined at F6 prior to sitting P6. Previous exam sittings have shown that many candidates sitting P6 do not have this knowledge. However, with P6, the emphasis will be on the practical application of tax rules to client scenarios rather than simply stating the rules.
Candidates will be expected to be able to identify issues and questions may require candidates to address ‘the tax consequences’ of a given situation without indicating which particular taxes to consider. It will be up to candidates to identify the relevant taxes and the issues in respect of these taxes before beginning their answers.
Candidates will also be expected to identify standard tax planning measures in order to minimise and/or defer tax liabilities. Not all tax planning involves complicated structures and plans. The P6 candidate should also be thoroughly familiar with the basic ‘bread and butter’ tax planning measures such as maximising the use of tax bands, and adequate pension planning. Sometimes changing the timing of a transaction can have a big effect on the tax payable.
In preparing for the exam, candidates should practise a range of basic questions in the individual tax areas prior to attempting the more complicated past examination questions which involve a combination of taxes.
From December 2012, the exam will have the following format:
Section A is compulsory and consists of:
Section B contains three questions of 20 marks each and candidates will be required to answer two of these questions only. These questions will contain concise, structured information, including sub-headings to make them easier to assimilate and navigate. This will enable candidates to read them quickly when deciding which two to answer.
While the Section B questions will be shorter and more focused than the questions in Section A, they can still require consideration of a number of different taxes.
The new format of the exam (whereby each question has a predetermined number of marks) allows the candidate to calculate the time to be spent on each question in advance of the exam. Careful time management will be important, particularly in Section A.
The level of detail to be given in the answer is often suggested by the verb used in the question (eg explain, outline) and should reflect the marks available for that part of the question. Where a question includes a number of sub requirements, it is important that candidates address all of the requirements rather than just a few in great detail.
It is important that candidates think before they start to write an answer in order to identify the relevant issues and calculations necessary, to support their advice. In addition, they should consider whether the necessary calculations can be carried out in a particularly efficient way. For example, in many cases a client will be a higher rate taxpayer regardless of the strategy chosen. Depending on the requirements of the question either the marginal rate of income tax or a combined marginal rate of tax (to include income tax, PRSI and universal social charge (USC)) can be used, without the need to prepare full income tax computations. This is what would happen in practice.
The pilot question is a ‘Question 1’ type question for 35 marks can be found at www.accaglobal.com/content/dam/acca/global/PDF-students/acca/p6/exampapers/IRL/p6-irl-pilot-paper.pdf
A client is disposing of his business. Prior to the disposal an accounting problem has been identified which resulted in an underpayment of tax for prior years. The following points are relevant:
The remainder of the question mainly involves calculating the various tax consequences of two options:
and recommending the better option. It would be expected that candidates who have practised the computational techniques associated with the above and have a good working knowledge of CGT and stamp duty, would score well here.
This pilot question contains a high proportion of calculation marks (63% of this question), whereas it is normal for P6 exams to include around 35–40% computational marks. While the pilot question may be more computational, this does not mean that the overall balance of the exam will change. Future questions could have this many numerical marks, but could also be mainly discursive.
Written by a member of the P6 examining team