The CII J03 October 2020 Exam in Review

This time, we’re looking at the J03 exam from the October 2020 sitting.  This is the exam that covers the tax and legal aspects of business.

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

The exam started quite gently with a question testing the actions that be taken where a business considers that another business name is very similar to its own and what can be done to prevent this happening. This was for six marks.

Question 2

The next question may have been more challenging. For three marks, candidates had to state how members of an LLP can become designated members and in part (ii) state five extra responsibilities of a designated member.

Question 3

This one was a calculation; the test was working capital ratios and quick ratios and basically what this meant to the company’s financial stability.  Ratios often come up in J03, so candidates really need to be ready for them. The total question was for 10 marks.

Question 4

This was a nice 5-mark question on the advantages of someone’s entering into an Individual Voluntary Arrangement.

Question 5

This tested what the accruals basis is and asked for two advantages and two disadvantages of using this method of accounting.  Overall the question gave eight marks.

Question 6

This one tested the taxation of employee benefits. Candidates had to describe how income tax would be calculated on free accommodation and in part (b), how removals expenses will be treated for income tax.  The question was for eight marks, and it would have been the case that either students had studied it and so knew the relevant figures, or they hadn’t.

Question 7

This was another calculation. This time, the National Insurance contributions and corporation tax liability for a small company was required. There were 11 marks on offer here, and hopefully, students would have picked up most of the marks for the process even if the figures weren’t entirely accurate.

Question 8

This question tested VAT: firstly, the Making Tax Digital rules, methods of accounting for VAT, and when bad debt relief for VAT can be claimed. The question gave nine marks overall and may have been a struggle for even a well-prepared candidate to score high marks.

Question 9

Next, another tax question: firstly, the CGT position of a mother’s gifting catering premises to her son and in part (b), the IHT consequences of doing this. Candidates needed to know the finer detail of holdover relief and the potentially exempt transfer rules to gain good marks on this question (there were 14 marks available).

Question 10

This question was around employment legislation. This time, three reasons were needed for dismissal where the reason is potentially fair, and the rights of an employee to be informed of the reasons for dismissal.  This was for seven marks overall and may have tested even the well-prepared candidate.

Question 11

This question also covered employment law. Firstly, candidates had to list four reportable work-related injuries under legislation and in (b), identify the details needed to be entered into a workplace accident book.  Even if candidates hadn’t studied this chapter in too much detail, they should have been able to have a well-educated guess to both these question parts.

Question 12

This question was on business protection: firstly, when a flexible whole of life policy might be appropriate for key person insurance and in (b), the options available in respect of this type of policy if the key person leaves the business. This was for seven marks overall and should have caused little or no problems for candidates.

Question 13

Continuing with business protection, candidates in this question had to explain the benefits of a cross option agreement compared with a buy and sell agreement, in relation to the facts in the mini case study given and IHT.  Candidates should have done well on this, as clearly cross option agreements appear in many (most!) exam sittings.

Question 14

This question tested factoring. Firstly, candidates had to explain what is meant by the term factoring and in (b), state three advantages and three drawbacks of factoring. Overall, the marks available were nine.

Question 15

The last question covered pensions. Candidates had to calculate a pension contribution for an employee and in (b), calculate the income tax payable by them.

Comparison with the October 2019 Exam Paper

If we look at what was tested in October 2019’s paper, we can see if there has been any overlap. This question paper can be found here.

The topics covered were:

• Bankruptcy where a partnership agreement is not in place and where one is in place
• Advantages and disadvantages of setting up a business as a sole trader
• Similarities and differences between LLPs and limited companies
• Legal obligations of auditors
• Company profitability
• Personal security and real security
• How interest on a loan is treated for tax purposes
• IR35 rules
• CGT on the sale of a business
• Contracts of employment
• Budgets and business planning
• LPAs and wills
• Business protection and cross option agreements
• Salary sacrifice – benefits and drawbacks

Overall, the October 2020 paper seemed fair with many areas appearing that have been tested in previous exam sittings. For that reason, it is essential to study previous exam guides to ensure familiarity with the format as well as the level of detail that’s needed to score well.

The manual is daunting in its size, but the syllabus is followed closely and similar subjects are tested time and time again, so it’s worth putting in place a detailed study plan to ensure that everything is covered as much as possible.

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!