Accounting Qualification
Chief Assessor’s report
Technician/Level 4 Diploma (QCF)
Preparing personal taxation computations (PTC)
December 2009
General comments
As ever with this paper, students were expected to have fully covered all aspects of the Standards,
anticipating that everything would be assessed. Benefits in kind, income from various sources, income tax
payable, capital gains tax and income from land and property were all in this paper, with the majority of
candidates performing well.
Section 1
Task 1.1
This task required students to show knowledge and understanding of four actual or potential benefits in kind.
Students were expected to decide if the benefit was taxable and if so, what the value of that benefit was.
The main benefit within this task covered the provision of a company apartment, and students needed to
calculate three benefits within this one: the annual value, the expensive cost and the use of the furniture.
Whilst many students computed the £7,525 with no issues, too many struggled with all the different figures
and facts given in the data. For instance, students thought that the highest of the £4,000 or the £3,125 was
taken, but not both. Too many students failed to apply the 20% to the cost of the furniture, and used the full
£8,000 instead. Other students did not appear to have studied accommodation at all and became very
confused. Indeed, one of the markers commented ‘I have seen every possible combination of figures and
percentages for the apartment’.
Both the loan and phone provisions were exempt from tax, and students needed to both appreciate that and
state why. Lastly, too many students totally ignored the pension contribution made by the employer. This is a
potential benefit in kind, but it is exempt and students should have clearly stated that.
Task 1.2
This is a core task to this paper, being treated as almost a working necessary before the actual tax in task
1.3 can be calculated. Students needed to bring in all the sources of income for Bridget, including the
benefits in kind just computed in task 1.1. Students also needed to show understanding of how to gross up
the building society interest, the bank interest and the dividends. Lastly, they needed to show that they
understood that the interest from the ISA was exempt.
Generally, this task was very well done, with the vast majority of students using an appropriate layout and
structure to their answer, which then naturally led into the next task. Typical errors made by students were in
forgetting to include the profits of £9,000 or wrongly grossing up the investment income.
Task 1.3
Again, this was another core task to this paper, requiring candidates to accurately compute the income tax
for the year. There were no complications to this task, as in previous papers, but students still needed to
accurately apply the 40% band. Students tended to overly complicate the computation by trying to extend the
basic rate with pension payments, but as the pension payments are occupational, the tax relief is gained at
source and not by extending the basic rate.
Task 1.4
This task involved students producing a highly structured answer on an oft-asked benefit in kind – provision
of cars. However, students needed to do two things for this task: compute the tax payable by Bridget if she
gets the car, and provide a justification for those figures. Many students found the first part of this task quite
straightforward, but struggled with the justification side.
In terms of the computation, students needed to appreciate that the full list price of £25,000 needed to be
used and not either the £22,000 or the £20,000. The percentage to be used from the CO 2 emissions was
straightforward, causing virtually no student any issues. Likewise, the fuel benefit was handled well.
For the contribution of £100 that Bridget needed to make, students should have realised that this was not
deductible as it is to be set against the fuel. In order to be deductible, it must either cover all the private
usage (which it did not) or be set against the cost of the car.
In terms of the explanation, students were expected to explain, for instance, why the cost used was £25,000,
or how the percentage of 30% was arrived at. This was a clear task in the paper, but many students gave the
computation only without the vital narrative. Students must be able to justify their figures in this unit, so that
clear and accurate advice can be given when necessary.
Task 1.5
This task caused a lot of confusion, yet was very simple. Bridget has only asked you to pass on her number
to your cousin. The request to do this is in writing and there is no breach of any confidentiality at all. She is
not asking for your cousin’s number, nor any information about him. However, the vast majority of students
appeared not to have read the information fully and simply assumed that confidentiality was the answer. Very
common wrong answers included: ‘due to confidentiality, you cannot pass Josh’s number to Bridget’; or ‘I will
need this request in writing before I can do anything.’ Both indicate a lack of reading the information given in
detail, which is very disappointing.
Section 2
Task 2.1
This task was quite long, requiring candidates to compute the capital gain, or loss, for four capital assets.
Most areas of capital gains tax was addressed in this task, so full knowledge of the rules was vital.
Part (a) was straightforward, with students simply needing to show the proceeds less the cost for the threebedroom bungalow. In the main, this part of the task was well handled.
Part (b) was more complex, with students needing to apply the rules for bonus issues and part disposal of
shares. However, the vast majority of students handled this task well, gaining full marks.
Part (c) was clearly an issue for many students. Traditionally, students have struggled with part disposals,
especially when acreage is involved. This task had the complication of the balance of acres being sold, the
first disposal occurring some six years earlier. Therefore, students needed to work out the original cost as it
applied to the 30 acres sold in March 2009. One way to do this was the work out the original cost of the 20
acres sold in February 2003, and the balance left applied to the 30. Two common errors occurred in this
answer: students either used the cost for the 20 acres, and not for the 30, or they worked out the gain from
the 20-acre disposal in February 2003 and added that into the total. As this disposal occurred six years
earlier, it is clear that it is not taxable in 2008/09.
Part (d) should have been quite straightforward, with candidates having to apply the chattel rules to this task.
Many understood that £6,000 featured somewhere, but were unsure where. A typical wrong answer was to
show the cost as £6,000 instead of using it as the proceeds. Another error was to apply the commission to
the proceeds and not to the cost.
Task 2.2
This task involved students bringing all their own figures from task 2.1 together, deducting the annual
exemption and applying the capital gains rate of 18%. The vast majority performed well in this task, and
gained full marks. Even the due date of payment was accurately given, an area previously mishandled by
students.
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Task 2.3
This task involved the computation of the profit from income from land and property. Students were expected
to demonstrate knowledge of how rental income is computed, and the expenses which are allowable
deductions.
The computation of the expenses was well handled by the majority of students, including the computation of
the wear and tear allowance on the two-bedroom flat. However, the computation for the rental income was
very poorly handled. Working out the right number of months to apply seemed to cause many problems, with
every number being used, except the right one. This is an area that students must address for future sittings.
Task 2.4
To complete this paper, students needed to show knowledge of the rules for principle private residences.
Given that Peter has lived in the house continuously since purchased, it is clearly his main home, and
therefore the exemption allowed under PPR would apply. Generally, this task was well answered with many
students gaining full marks.
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