It is about time I got round to writing this blog on passing ACA TC, which now completes the set of Professional Level exams. Perhaps I avoided this one on purpose as if you have read my difficulty blog it will be no surprise to you that I found this exam to be the hardest Professional Level exam. Yes, I actually did find Tax Compliance to be harder than BPT! I genuinely thought I had failed this exam but was pleasantly surprised achieving 70. Let’s get straight into how to pass this difficult ACA TC exam.
Table of Contents
What is the Tax Compliance (ACA TC) Exam Actually Like?
According to the ICAEW syllabus, the aim of ACA Tax Compliance (TC) is “to enable students in straightforward scenarios to: prepare tax computations for individuals and companies; understand the tax implications of a course of action; and explain potential tax treatments of transactions.“
As I did in the FAR blog post, I will start with a table to summarise this exam. This is for those of you who are unaware of the details behind the ACA TC exam. Having the basic understanding will help you know what you need to do to pass ACA TC. This has also been covered here but the key points are outlined below:
|Duration||2.5 hours as are the majority of other Professional Level exams|
|Pre-Requisite||Certificate Level Principles of Tax (PTx)|
|Key Examinable Areas||Ethics and law, indirect taxes, capital taxes, corporation tax and income tax and national insurance|
|Open Book||Partially. You are only allowed to take in the permitted texts with you which is the Hardman’s tax rates and tables.|
|Pass Rate||As per https://jagsjourney.blog/2021/01/21/icaew-aca-exam-difficulty/#professional-level-icaew-pass-rates above 75%|
As always, it is worth checking if you qualify for any credits for prior learning/exemptions. You can find out more here. However, ACA TC does help you prepare for Professional Level BPT (depending on which order you take these exams in). I personally think you can still do well in BPT without doing the TC exam and this was proved by someone in my ACA TC class who had already passed BPT. The content required will be recapped. Additionally, none of the Advanced Level exams require any tax knowledge. You therefore will not be shooting yourself in the foot in terms of the ACA qualification if you take the exemption.
Pass ACA TC by Understanding the Exam Structure
The exam structure for ACA TC is very straightforward. There are always five questions where each represents the below syllabus areas:
1. Ethics and law – 5-10%
2. Indirect taxes (stamp taxes and VAT) – 10-15%
3. Capital taxes (capital gains tax (CGT) and inheritance tax (IHT)) – 20-30%
4. Corporation tax (CT) – 15-25%
5. Income tax (IT) and national insurance (NI) – 30-40%
Although the exam seems quite predictable in terms of the above structure, I still found there was a lot to learn and found the exam to be very content heavy. Knowledge and skills is actually 65-75% of the exam compared to 25-35% application so you really do need to know your taxes. This is of course much easier if you work in tax but I for one did/do not.
You may be looking at the above structure and be tempted to focus on the two biggest areas such as income tax and capital taxes given the pass mark is 55%. However, I would really not encourage this. There is so much content in the ACA TC exam that it is very difficult to completely nail one tax. It is likely you will drop a few half marks all over the place for the nitty gritty tax rules. You will have a much better chance of passing if you try to do well in all areas. It is likely every tax you learn will be examined given the above structure so you will not be wasting your time.
I will try to boost your confidence early on in this article and mention the easy marks in ACA TC. These are the ethics and law 5-10% questions. Unlike all other Professional Level exams which have ethics scattered across the paper, in ACA TC ethics and law is always the first question. Typically the question will carry 7 marks and I found in ACA TC that these questions are more predictable. It is easy to overlook the ethics marks but if you take the time out to try to nail ethics, you will not regret it.
There are a wide variety of questions that can come up initially but I found common areas that would come up were tax evasion, tax avoidance and money laundering. Once you have practiced a few of these from the ICAEW Question Bank, you will start to pick up the tricks to gaining the marks for these types of ethics questions. I would advise grouping the different types of ethics questions as you go along and build up model answers for each. This means when you come close to the exam you should be quite confident you can at least get the majority if not all of the ethics marks.
This should set you off to a good, strong and confident start. However, it can be disheartening if you do follow the above and it does not go your way. Nevertheless, you are likely to do better in this first question if you have put in some time to focus on this rather than if you had neglected it.
Permitted Text – Hardman’s Tax Rates and Tables
If you have started learning the technical knowledge for ACA TC, you will definitely be aware very early on that TC has a LOT of tax rules/rates that you need to know. I would strongly recommend memorising the most common tax rates off by heart for timing purposes such as for income tax, corporation tax, etc. This will definitely come with practice. However, you do not need to know absolutely everything off by heart as you are provided with the Hardman’s Tax Rates and Tables.
Really take the time early on to go through this in detail and tabbing up the useful parts. For example, on inheritance tax taper relief and other specific rules, you will be able to find these in the permitted text if needed. It is just good to be aware of what you definitely need to memorise and where you can use a hand if needed.
Tip: There are still many rules not included in the tax book such as allowable expenses. On this, I will flag that the treatment for allowable or disallowable expenses varies based on the wording of the question so look out for this.
Approach to Revision for ACA TC
The best way to do well in ACA TC is by nailing the proformas for all the different types of taxes you can be examined on. To recap the key examinable areas include IHT, CGT, CT (including capital allowances), etc. Nailing the proforma for IHT specifically will really keep you on track to scoring high marks in this area. I mentioned in the FAR blog that a consolidation a day keeps the resit away. Perhaps this can be applied here with an IHT question a day?
Note that nailing proformas will not come by continuously reading through the content. Practice is definitely key and I would recommend going straight to the ICAEW Question Bank once you have been through the content once over. In either a mock exam or my real exam, a tricky uncommon corporation tax question came up where the period to be calculated over was 15 months. Reading notes alone will not help you here as you are likely to skip over it. Question practice will highlight weak areas and get you prepared for the exam.
In terms of question practice, I believe the best way to really memorise the content would be to practice questions on the same examinable area back to back. For example, attempting several indirect tax questions at a time should make you realise that there is not too much variety in the questions that can be asked here. You should also start to see that you do need to read the question carefully as there could be a different treatment for individuals or companies. Do not forget to take a step back and look at the bigger picture too. Some taxes can actually interact with one another such as CGT and IHT.
I will also state here that you should also try not to forget what you learnt in Principles of Tax (PTx). This will come up again in TC and you should take the time to recap and build up your knowledge. Do not skip over income tax because you are familiar with it as it will still require practice. CGT for example is not exactly the same content and extra reliefs are added.
Approach to the Tax Compliance (TC) Exam
I think the way to do well in the ACA TC exam is to change your approach early on compared to other ACA exams. What I mean by this is that this exam in my opinion is much harder to nail and score top marks, especially if you do not work in tax. In FAR or FM, with practice you can really master the content and it is all quite logical and easier to remember. TC on the other hand, I found it to be less logical in terms of tax rules. Perhaps I had not understood the rationale behind the rules as well but I did just find it harder to remember.
Practice will definitely help aid memory combined with learning from mistakes but given the volume of rules, it will be difficult to pick up every single relevant one. What helped me get through this exam is knowing that for every little rule, if you do not get it spot on you will only lose half a mark. Of course these can add up and you want to avoid dropping marks but do not get disheartened if you do lose a few here or there. It is 55% to pass and hopefully if there is scaling (unconfirmed) it is in your favour.
If you can get the overall gist of the taxes right and keep going in the exam without beating yourself up about dropping small marks, you will be fine! You will still get follow through marks and there is no negative marking so resilience is key. In the TC mock I was convinced I had done awfully and wanted to walk out. I kept pushing and actually passed. The same went for the real exam where I really thought I failed but achieved 70. No really, I literally nearly started revising for my resit straight after the exam and had dreams about failing until results. I would therefore advise to practice and have faith for this one!
Note: the examiner comments in the ICAEW Question Bank can be quite helpful and Paradigm Shift have stated a few tips for how to stop losing marks here.
TC Exam Timing and Order
With the majority of ACA exams, there will be the time pressure that comes with it. As mentioned, ACA TC is 2.5 hours long. This means there are 1.5 minutes per mark. It is crucial to stick to the timing for TC as with all ACA exams. This is how I would go about timing:
On the first page of the exam, it states the number of marks for each question. However, ACA TC is even more specific with the marks as each question usually has sub-requirements. Fortunately, unlike with BPT, the marks are provided for each of these. Therefore, I would for each sub-requirement multiply each of these marks by 1.5. This would tell me how long can be spent on each sub-requirement. Then convert these to real timings you can stick to it. See this example below for question 3 that is 25 marks in total. I have assumed the timer still counts down as it did during my exams.
Note: I have assumed 30 minutes (20 marks) have already passed for question 1 and 2 below.
I do not actually recall ACA TC being too time pressured but there definitely was not plenty of time. You need to keep moving and I would suggest answering in the order you are most comfortable with. For me, it was in the same order of the exam rather than attempting certain areas first. The only ACA exam I jumped around in was ACA Corporate Reporting (CR) which went awfully, read here.
However, everyone is different so it is up to you. If you want to build you confidence with your strongest tax area first then try it. Do keep in mind that if this does not go as well as you had hoped then this could knock your confidence. What I would say though is to pick a strategy and stick to it.
ICAEW Exam Software
I would always recommend practicing questions in the ICAEW exam software. This software is always changing. I was involved with the software testing and have really seen the evolution of this. For ACA TC, this will not be as complicated but you do not want to be in the position where you are ready to pass TC but slip up because you are unfamiliar with the software. You can download the blank exam practice software here.
ACA TC Wrap Up
That brings me to the end of this blog and completes the final ACA Professional Level blog passing set (if that even makes sense). For TC, to summarise you need to nail the proformas, practice and persevere (3 Ps). Past papers can be found here if you want to try these as your own mock exams. Good luck! If you would like to connect with other ACA students feel free to join this Telegram group (essentially WhatsApp without phone numbers).