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How To Pass ACCA Advanced Tax (ATX)

Hand typing on a calculator
Neil Da Costs
By Neil Da Costa, Senior Tax Lecturer Link to Neil Da Costa's LinkedIn profile

The Advanced Tax exam at the ACCA Professional Strategic level is one of the most challenging. To assist students, senior Tax Lecturer, Neil Da Costa shares some tips and techniques when approaching this paper.

Having been an Advanced Tax lecturer for more than 20 years, I believe I’m ideally placed to give you some key insights in approaching this paper. So here are some thoughts…

Start with the end in mind

In his classic bestseller, ‘The 7 Habits of Highly Effective People’*, Stephen Covey recommends we approach a task with the end in mind.

The Advanced Tax exam is a 3-hour 15-minute exam with two compulsory multi-tax case study scenarios worth 60 marks. Generally, one of the questions will be based on individuals while the other question is based on companies.

These are very practical real-life scenarios such as a client receiving an inheritance from a parent and planning on starting a business. We would have to quantify the inheritance tax liability and then advise the client on the income tax implications of setting up the new business, based on anticipated profits or losses on commencement.

Alternatively, a UK company may be planning on expanding overseas and is unsure whether to set up a branch or purchase an overseas company. Here we would advise the client of the different corporation tax implications dealing with areas such as corporate residence and double tax relief.

In addition, you will have to attempt two shorter 20-mark questions which will be worth a total of 40 marks. With the 20-mark questions, they are easier to understand and will also feature companies and individuals.

Four skill sets are required

In the exam, you are a tax advisor giving advice to a client and the case study questions are like solving a puzzle. To avoid falling into the examiner’ traps you must learn the technical tax rules.

The exam, like all the other ACCA exams, is very time pressured so you need to process information quickly and accurately.

The four skill sets are:

  • Technical Tax Knowledge (you need to understand the tax rules to advise the client correctly)
  • Analytical ability (it is essential to interpret the question and focus on the actual requirements)
  • Written skills (you will have to explain your answer and how it relates to the client’s needs)
  • Computational skills (you will be computing different tax liabilities such as inheritance tax and VAT so need to do the calculations accurately)

Prep for the Computer Based Exam

The Advanced Tax exam is a computer-based exam, and you have to navigate through several documents such as a client letter, a memorandum from the tax manager or an email.

In the 35-mark question, you will be required to present your answer in a professional format such as a report or notes for a client meeting and there will be 4 marks for presentation.

With regard to the other questions, no presentation marks are available.

You will have the option of using either a word processor or a spreadsheet. When writing explanations, it is much easier to use the word processor. I’d recommend you copy and paste the requirements into your answer to be more efficient.

With regard to the calculations, it is extremely easy to set up a little table in the word processor. Alternatively, for those of you who are Excel wizards, you might prefer to use the spreadsheet. I recommend you only use the spreadsheet for large columnar calculations such as trading losses or group calculations to save time.

I have demonstrated these techniques for both written and computational questions using the specimen paper from the ACCA webinar. I recommend you watch that later (link below).

Technical debriefing

In the webinar I hosted on this subject, to demonstrate some technical application, we looked at how to establish an individual’s domicile and the impact of this on an individual’s income tax and capital gains tax liability.

To learn the detailed tax rules I recommend the use of mind maps such as the one below.

Boxes of text with arrows 

Furthermore, we also attempted a computational question illustrating the methodology behind computing the income tax liability of a UK domiciled individual who has both UK and overseas income.

You now have some insights into this fascinating exam, and we look forward to helping you pass the Advanced Tax paper at Kaplan.

Webinar recording

Watch the full webinar recording

Neil Da Costa is the author of "Advanced Tax Condensed" and a Senior Tax Lecturer with Kaplan. He believes in keeping things simple and making tax fun.