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Using the tax legislation in examinations

Simon Groom explains how students can make the most of taking their tax legislation books into the exams

This article is aimed at students who can take the tax legislation books into their examinations and in particular at ATT, CTA and AIIT candidates. The references to the legislation are to the Tolley Yellow and Orange Tax Handbooks.

When students are told that they can take external reference books into the examination hall it is usually a cause for celebration because it means that they will be able to look things up on the day rather than having to learn them. However, the party soon turns sour when they realise exactly what it is that they are allowed to take in. Many students struggle with using the tax legislation and quite a few fail to use them in their exams, despite now having a severe back problem caused from carrying the five volumes around with them!

Here are a few tips to make the most of your “tax bible”.

1) Familiarise yourself with the books before your real exam, trying to unwrap the books on the day and find your way around them is a recipe for disaster.

2) Know the main contents of each of the books. For example, volumes 1A, 1B and 2 of the Yellow book deal with income tax, corporation tax and capital gains tax, with volume 3 covering mainly inheritance tax and national insurance. The Orange book covers principally VAT.

3) You should also know that volumes 1A and 1B cover the tax statutes relating to income tax, corporation tax and capital gains tax, arranged in chronological order, whereas volume 2 includes all of the statutory instruments relating to these taxes along with non-statutory material such as statements of practice, concessions and press releases.

4) It is worth knowing what each of the main statutes deals with so you know roughly where to look for something (using the index under pressure can prove very stressful so it’s worth having a basic sense of direction). Here is a quick summary:

TMA 1970 – admin rules for income tax and capital gains tax
ICTA 1988 – corporation tax provisions such as loss relief and groups of companies
CAA 2001 – rules on capital allowances
ITEPA 2003 – anything to do with earnings and pensions
ITOIA 2005 – provisions relating to sole traders and partnerships
ITA 2007 – general income tax provisions such as personal allowances, losses and EIS
CTA 2009 – provisions relating to companies such as loan relationships, intangible assets, and research and development

All of these key statutes are identified by grey shading on the edge of the page, and the un-shaded parts in between consist mainly of finance acts.

5) Make sure you know exactly what markings you are allowed to put in your books; your training provider will be able to give you guidance. And don’t let your book wander round the office so that other people can doodle on it which might mean that you are breach of the rules regarding marking the books.

6) If you do highlight certain provisions, only highlight those that you will be able to make sense off in the exam, don’t make the mistake of colouring in the whole book, no matter how nice it might look.

7) When you have highlighted something, go to the beginning of that particular Act and you will find a list of all of the sections. On this list highlight the ones that you have highlighted in the Act itself. This will make it easy to find.

It’s all very well highlighting something in CTA 2009, but when you can’t remember which section it was that was useful you have to search through 1300 sections and over 500 pages to find it. If you’ve highlighted the list of sections it’s a lot quicker to spot.

8) Watch the time allocation if you are copying things out of the legislation. For example if you’re asked to list the records that you must keep for VAT for 3 marks, you will find the relevant information in the Orange book. However 3 marks means 6 points and you have just over 5 minutes to answer the question. Don’t spend half an hour copying the whole regulation out, the first six items will do.

9) Don’t rely on the legislation to explain a provision to you on the day, you’ll find it most useful for definitions, conditions and lists.

10) Don’t start looking something up in the index until you have done everything else that you possibly can on all of the questions. Searching with the index is very time consuming and it is very easy to waste 15 minutes looking for something that turns out to be useless.

The legislation can be extremely useful in an exam if used properly, but that requires plenty of prior preparation.

Happy reading!

Simon Groom is Head of National Tax Training at Tolley, part of LexisNexis, and is also a member of ATT Council. He can be contacted on 020 7347 3559 or at taxtraining@lexisnexis.co.uk.

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