The CII J03 April 2019 Exam in Review

This time, we’re looking at the CII J03 April exam, the tax and legal aspects of business. This will be of interest to you if you’re planning to sit J03 in October.

You can find a copy here.

Candidates are given two hours to answer 15 short-answer questions for a total of 130 marks.

Question 1

This question tested four types of insurance a sole trader can put in place to reduce business risk; the names were needed as well as an explanation of each risk they cover. This was for eight marks in total, and we think this was quite a good start to a business planning paper.

Question 2

This question asked candidates to state and explain two ways that a partnership can be created under the Partnership Act 1890. This was for six marks and has been tested a number of times before.

Question 3

This question asked for a list of the documents needed for a company to incorporate (for three marks) and then the process to achieve incorporation (for another three marks).  Most candidates would have been comfortable with Articles of Association and Memorandum of Association and probably would have also known that these are sent to Companies House, but attaining full marks might have been a challenge.

Question 4

We then had questions on limited companies; firstly for two marks, a definition was needed of the role of a director and a shareholder; then six non-statutory duties of a director and four rights of minority shareholders.  The first part of the question would have been no problem for most candidates, but the two lists might have caused more difficulty.

Question 5

The exam continued with a question on limited companies – this time, a list of the conditions that must be met to avoid an audit. This was for three marks and, for another four marks, candidates were asked for a description of the main statements an auditor’s report usually contains. Again, this is quite specific information, which may have caught some people out.

Question 6

Next up, was a question that has come up many times before: an explanation of a fixed charge and a floating charge for two marks and then an explanation of why lenders prefer a fixed charge rather than a floating charge for another three marks.  Anyone using past papers to revise from should have had no problem with this question.

Question 7

This was quite a tricky question on how expenditure incurred in setting up a sole-trader business is treated for tax; this was for five marks so not too many to lose if candidates hadn’t studied this area.

Question 8

This question was on self-employed taxation – another area recently tested.  Candidates had to calculate profits charged to income tax in three different tax years.  This would have involved apportioning the first year.  For the second part of the question, candidates had to explain how overlap profits could be used for four marks and finally for another four marks, identify the elements that make up the self-assessment payment on the 31 January 2020.  Self-employed tax is fundamental to advising small businesses, so candidates should have had a good handle on how to tackle this question.

Question 9

This question required two calculations: one for the NICs for an employee with group PMI and the other the employer’s NIC liability.  The question was for 10 marks in total and would have meant including the PMI with the employer liability but not with the employee liability.

Question 10

This question tested capital allowances with general pool and special pool calculations needed.  This was for nine marks, and we suspect it might have caused some difficulty as quite a specialist area.  Candidates also had to state three examples of assets the business might buy that would not be included in either the general or special rate pool.

Question 11 and Question 12

Both these questions tested areas from the chapter on employment law.  Firstly, candidates had to state the information to be provided at the start of a redundancy consultation process (for 5marks), then list the criteria to qualify for statutory redundancy pay (for 2 marks).  Question 12 asked for the qualifying conditions for Statutory Paternity Pay (for 4 marks).  These questions are very specific and historically the learning outcome that is not answered well by candidates.

Question 13

This question was on business protection and specifically the financial implications to a company should a key employee become ill.  This was for five marks.  The second part tested the criteria for premiums on a key person policy to be tax-deductible for the employer.  This is obviously core knowledge for anyone studying for a business planning exam so should not have caused too many problems for candidates.

Question 14

The exam continued with another question on business protection; candidates were asked to explain how a shareholder protection should be set-up to satisfy certain objectives.  This was for nine marks and again should have been an expected question in this exam.

Question 15

Finally Question 15 and to end the exam candidates had to do two calculations: first calculate the cost of a property intending to be bought by a SIPP (for 5 marks) and then the gross pension contribution needed to buy the property (for another 5 marks).  The final part of the question asked for a list of the main tax advantages of the SIPP purchasing the property as opposed to the client buying it personally (for 8 marks).  The calculations may have proved challenging for some, but we hope that most candidates would have thought of enough advantages to score well on the third part.

Comparison with the October 2018 Exam Paper

Let’s compare this with the paper from October 2018:

This exam covered the following:

• Differences between ‘actual’ and ‘apparent’ authority of a partner
• Differences between a floating charge and a fixed charge debenture
• How a trustee in bankruptcy deals with a family home as part of bankruptcy
• VAT for a sole trader and the consequences of them being VAT registered
• Working capital ratio/quick ratio and financial stability
• Losses in the early years of starting a business
• Business relief
• SSP
• Flexible working
• Income tax calculation – UK shares and UK Fixed Interest Securities
• Taxation of beneficial loans
• Key person insurance
• CGT
• Buy and sell agreements and cross option agreements
• Salary sacrifice
• Recycling a PCLS

In J03, similar areas are tested each time, so it is important to use past exam guides for studying.  The J03 manual is one of the largest the CII produces, so it is also important to get a study plan in place and to stick to it.

Grab the resources you need!

If you’re studying for your CII J03 exam, and you’re feeling anxious about exam day, grab our free taster to try out one of Brand Financial Training’s mock exam papers for yourself.  Click the link to download the J03 mock exam taster now!