The R03 Personal Taxation exam can be a really challenging paper, not least because candidates are faced with 50 exam questions to complete in 60 minutes. For an exam that often features many calculation-based questions, this time pressure can feel quite stressful. One of the reasons that calculation questions cause R03 candidates so much stress is candidates tend to feel the need to dive straight into the detail and very quickly find themselves lost in all the figures. The best approach with this type of exam is to have a process for dealing with calculation questions, starting with taking a deep breath before attempting each one! Having a process that you have practised in advance will help to reduce calculation errors caused by missing out key steps and will help you to feel more in control of the exam. Each of the tax calculations has a logical process that you can follow to arrive at the right answer. For income tax it’s an eight-step process, for CGT it’s a six-step version.Â
The points are in the PROCESS
If we look at the steps for an Income Tax calculation, these are:
Let’s apply these steps to a specimen question:
Bella is an employed structural engineer who has received income from various sources in the current tax year. Her incomes are:
Salary of £56,040, Benefits in kind £5,000, Rental income from buy to let (after expenses) £38,000, Dividends £2,100, Interest £400, and net PID income £160.
What is her income tax liability for the current year?
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BTS tip: The CII examiners have a good idea of the mistakes that candidates are likely to make along the way with calculation questions. Watch out for incorrect distractors in the answer options, it’s very easy to miss out one part of the calculation process but still arrive at an answer that is listed in the possible answers!
Learning and practising all the steps for each of the calculation types and knowing which steps should be considered BEFORE you pick up the calculator, are skills that will serve you well to pass the CII R03. The more exam-standard calculation questions you can practise in advance, the stronger the brain muscle-memory for applying the process.
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