The CII J03 March 2021 Exam in Review

This time, we’re looking at the J03 exam from the March 2021 sitting. This is the exam that covers the tax and legal aspects of business.

You can access the exam guide here.

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

Question 1

The exam started with a question testing what an individual should do when starting a business from home.  The question stated that there was a mortgage on the home, which was a clear signpost to one of the answers.  This question was for six marks and was a nice start to the exam.

Question 2

The next question would have been more challenging as it tested capital contributions and loans when a partnership is set up under the Partnership Act 1890 rules.  The question was for eight marks overall, and candidates generally struggle with questions on the Partnership Act, yet most exams will have a question on some aspect of it.

Question 3

We then had a question on tort liability within an ordinary partnership and a limited liability partnership. The question was for five marks overall and again this type of question often causes some difficulty for the less prepared candidate.

Question 4

The exam continued with legal aspects of business with a question on the situations in which a company director can be automatically disqualified for general misconduct and additional reasons which may lead to a director’s automatic disqualification.  In total, the question gave nine marks.

Question 5

This question asked for three reasons why being able to interpret company accounts is a valuable skill for an adviser when advising on business protection and the differences between filing accounts for a micro-entity and a small company.  Part (c) asked which two documents at Companies House you would need to examine to determine a company’s directors, their approximate shareholdings, and the value of their shareholdings.  In total, the question gave seven marks.

Question 6

This question tested an area perhaps not tested before so may have been challenging, the subject of alphabet shares.  For nine marks overall, candidates had to firstly state how alphabet shares can be created by a company and then explain why a company might issue different classes of share.

Question 7

This was our first calculation.  We were introduced to Heiko operating as a sole trader. When he set up in business, Heiko took out a loan, and his friend Enzo acted as guarantor. Heiko had defaulted on the loan and Enzo has been called upon for the sum of £10,000. Enzo had taxable earnings of £35,500 and had realised a recent gain of £30,000. Candidates had to calculate Enzo’s CGT for a total of eight marks.

Question 8

This question tested SAYE schemes; candidates had to explain the benefits and tax advantages for an employee of buying company shares under such as scheme and was for 10 marks in total.

Question 9

Another calculation came next; with a NICs calculation for 5 marks and then an explanation of when the individual would need to pay her NICs. In total, the question gave 11 marks and should have been answered well by candidates.

Question 10

Onto the home straight, and this question asked for the conditions that must apply when a company buys back shares from a shareholder in a private limited company for the purchase to be treated as a capital gain.  This was for seven marks and might have caused difficulty for some candidates.

Question 11

This question was on an area that has not been overly tested in the past; it concerned a property portfolio including three cottages which qualified as furnished holiday lettings, a block of flats rented furnished to students, and a detached house let furnished to a family. Candidates had to state whether a claim for capital allowances would be allowed, firstly for fitting new security systems in the cottages, then the cost of replacing carpets in a student flat, and finally replacing a dishwasher in the detached property. Overall, the question was for six marks, and some candidates would have struggled.

Question 12

This question tested TUPE, which has been tested before and hopefully didn’t cause candidates too many problems as in total, it gave 13 marks.

Question 13

This question tested how a market valuation would be carried out on private limited company shares. This was for four marks and part (b) asked for an explanation of how a fixed value valuation should be carried out to ensure there are no adverse tax implications – this was for five marks.

Question 14

This question tested key person protection; candidates had to explain the protection cover that would ensure tax relief on premiums is preserved for five marks and in (b) list six factors a company may need to take into account when determining the sum insured on a key person policy.  This should have been an area where candidates had prepared well.

Question 15

Finally, the last question, and this was on flexi-access drawdown. Candidates had to first outline how pension benefits are taxed (for 3 marks) and in (b) state how benefits are taxed if death occurred at age 69, leaving the fund to a daughter (for 3 marks) and in (c) describe the circumstances when pension benefits may be subject to IHT (the final part being worth 5 marks).

The J03 exam seems formulaic with similar subject matter being tested over sessions – this exam did cover some new areas, which may have been challenging for some, but there were also questions on areas tested many times before where candidates could have made up some marks.

Comparison with the October 2020 Exam Paper

If we look at what was tested in October 2020’s paper, we can see if there has been any overlap. This question paper can be found here.

The topics covered were:

• Passing off business names
• LLPs and responsibilities of a designated member
• Working capital ratios and quick ratios
• Individual Voluntary Arrangements
• Accruals basis
• Taxation of employee benefits
• Calculation of NICs and corporation tax for a small company
• VAT
• CGT position on a gift and the IHT consequences
• Employment legislation on dismissal
• Employment law – work-related injuries
• Key person insurance
• Cross option agreements vs buy and sell agreements
• Factoring
• Pension contributions

Some areas overlapped but for the last J03 exam in October (for those who fail the June exam) students should look at a variety of past exam guides to ensure they cover all parts of the syllabus.

Grab the resources you need!

If you’re studying for your CII J03 exam, and you’re feeling anxious about your re-sit, 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!