ACCA TX Examiner Report Analysis: Examiner reports provide essential insights into the structure, difficulty, and common pitfalls of competitive exams. This analysis of the ACCA Taxation (TX) paper for the September and December 2019 sittings, re-aligned to the September/December 2025 sessions, serves as a strategic guide to help candidates refine their preparation. 

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By focusing on key observations and offering clear conceptual clarity, this report highlights critical areas where students often make mistakes. Understanding these insights will enable candidates to avoid common errors, master exam techniques, and approach the ACCA TX exam with greater confidence and efficiency.

ACCA TX Examiner Report Analysis

ACCA TX Examiner Report Analysis provides valuable insights into common pitfalls and key exam concepts. Check below for a strategic guide on enhancing preparation, focusing on areas like IHT exemptions, VAT schemes, CGT rules, and complex tax calculations. This analysis helps you avoid typical mistakes and improve your overall exam performance.

Also, Check: ACCA 2026 Exam Format

Section A: Objective Test Questions

Section A covers the entire syllabus, requiring thorough revision across all topics. Here are examples of key concepts tested:

Example 1: Long Period of Account for Companies

Scenario: Beta Ltd. has a 16-month accounting period (1 April 2024 to 31 July 2025), with total trading profit of £650,000, property business profit of £24,000, and specific Qualifying Charitable Donations (QCDs) in Nov 2024 (£3,000), Mar 2025 (£1,000), and June 2025 (£4,000). The question asks for the corporation tax liability for the first 12-month period.

Key Concept & Solution:

Companies cannot have an accounting period longer than 12 months; a long period must be split. The 16-month period splits into:

1. 12 months: 1 April 2024 to 31 March 2025.

2. 4 months: 1 April 2025 to 31 July 2025.

Allocation Rules:

• Time Apportionment: Trading profits and property business profits are allocated based on time.

• Date-Based Allocation: Chargeable gains, dividend income, and QCDs are allocated to the period in which the transaction date falls.

Calculation for First 12-Month Period (to 31 March 2025):

• Trading Profit: £650,000 * (12/16) = £487,500

• Property Income: £24,000 * (12/16) = £18,000

• Total Profits: £487,500 + £18,000 = £505,500

• Less QCDs: Donations in Nov 2024 (£3,000) and Mar 2025 (£1,000) fall into this period = £4,000

• Taxable Total Profits (TTP): £505,500 - £4,000 = £501,500

• Corporation Tax: £501,500 * 25% = £125,375 (assuming this TTP exceeds the upper limit).

Also, check: ACCA Portal Guide 2026

ACCA Portal Guide 2026

Example 2: Inheritance Tax (IHT) and Lifetime Exemptions

Scenario: Perry made cash gifts in 2024/25: £2,000 to his grandson (PET), nine monthly £1,000 payments for his nephew's school fees, and a £10,000 wedding gift to his niece. All gifts were from income, and his 2023/24 annual exemption was used. Perry earns £200,000 annually.

Key Concept & Solution: The question asks for the total value of PETs after all available exemptions.

1. Normal Expenditure Out of Income: The £9,000 for school fees (£1,000 x 9 months) is exempt as normal expenditure out of income, provided it's regular and doesn't reduce the donor's standard of living, which is implied by Perry's high income.

2. Marriage Exemption: The £10,000 wedding gift to the niece qualifies for a £1,000 marriage exemption.

3. Annual Exemption (AE): The current year's AE of £3,000 is available (prior year's AE was used). It's first applied to the £2,000 gift to the grandson, making it fully exempt. The remaining £1,000 of AE is applied to the wedding gift.

Calculation of Total PETs:

• Gift to grandson: £2,000 - £2,000 (AE) = £0

• School fees: £9,000 is fully exempt.

• Wedding gift: £10,000 - £1,000 (Marriage Exemption) - £1,000 (remaining AE) = £8,000

• Total value of PETs: £8,000.

Example 3: The Appeals Process

Question: In which case must an appeal be made directly to the Tribunal?

The correct answer is appealing a penalty for late registration for VAT. Appeals related to indirect taxes (like VAT), excluding penalties for VAT return errors, are made directly to the First-tier Tribunal, bypassing HMRC internal review.

Example 4: VAT Special Schemes

Match the condition to the applicable VAT special scheme(s).

Comparative Structure: VAT Scheme Conditions

(Memory Tip: The Flat Rate Scheme is for very small businesses, hence its lower turnover threshold. The Annual Accounting and Cash Accounting Schemes are for small businesses and share higher thresholds.)

Section B: Capital Gains Tax (CGT) Case Study

This section highlights key CGT rules through various scenarios. A good exam strategy is to read the requirements first, then refer to the relevant data.

Q1: Beatrice's CGT Liability

Scenario: Beatrice has a £47,100 gain qualifying for Business Asset Disposal Relief (BADR), an £11,600 gain from residential property, an unused basic rate band of £37,700, and an Annual Exempt Amount (AEA) of £3,000. She has no other taxable income.

Key Concept & Solution:

1. Order of Set-off: AEA is set off against gains not qualifying for BADR first, especially those taxed at higher rates.

2. BADR and the Basic Rate Band: Gains qualifying for BADR are treated as using up the basic rate band, even if taxed at a flat 10%.

Calculation:

• Residential Property Gain:

• Gain: £11,600

• Less AEA: (£3,000)

• Taxable Gain: £8,600

• Since the BADR gain (£47,100) exceeds the basic rate band (£37,700), the entire basic rate band is considered used. Thus, this £8,600 residential gain is taxed at the higher rate for residential property (28%).

• Tax: £8,600 @ 28% = £2,408

• BADR-Qualifying Gain:

• Taxable Gain: £47,100

• Tax: £47,100 @ 10% = £4,710

• Total CGT Liability: £2,408 + £4,710 = £7,118

• Common Error: Students often incorrectly apply the unused basic rate band to the residential property gain when a BADR-qualifying gain exists.

Q2: Principal Private Residence (PPR) Relief - Deemed Occupation

Scenario: Abilo sold a house owned for 180 months, with three periods of absence. The question asks for qualifying deemed occupation.

Comparative Structure: Deemed Occupation Periods

Q3: CGT on a Company Takeover (Share-for-Share Exchange with Cash)

Scenario: Abilo owned Lagoon plc shares (cost £40,920). In a takeover by River plc, he received £29,700 cash and 44,000 River plc shares (market value £1.65 each).

Key Concept & Solution: When a takeover involves new shares and cash, an immediate chargeable gain arises on the cash portion. The original cost must be apportioned between the cash and new shares based on their respective market values.

Calculation:

1. Market Value of Consideration:

• Cash: £29,700

• New Shares: 44,000 * £1.65 = £72,600

• Total Value: £29,700 + £72,600 = £102,300

2. Apportion Cost to Cash Portion:

• Cost allocated to cash = £40,920 * (£29,700 / £102,300) = £11,880

3. Chargeable Gain on Cash:

• Proceeds (Cash): £29,700

• Less Apportioned Cost: (£11,880)

• Chargeable Gain: £17,820

• The remaining cost (£40,920 - £11,880 = £29,040) becomes the base cost for the new River plc shares.

Q4: CGT on Part Disposal of Land

Scenario: Abilo bought 10 hectares for £60,000. He sold 8 hectares for £114,000. The remaining 2 hectares had a market value of £24,000. He spent £16,800 clearing only the 8 hectares sold.

Key Concept & Solution: This is a part disposal. The original cost is apportioned using the formula: Cost * [A / (A + B)], where A = gross proceeds from part sold, and B = market value of part retained.

Calculation of Total Deductions (Cost):

1. Apportioned Original Cost:

• Cost = £60,000 * [£114,000 / (£114,000 + £24,000)]

• Cost = £60,000 * (£114,000 / £138,000) = £49,565

2. Enhancement Expenditure: The £16,800 spent only on the sold portion is fully deductible and not apportioned.

3. Total Allowable Deductions: £49,565 + £16,800 = £66,365

Q5: Cost of a Wasting Asset (Copyright)

Scenario: A copyright was bought on 1 Jan 2020 for £36,000 (18-year unexpired life) and sold on 31 Dec 2024.

Key Concept & Solution: For wasting assets, the deductible cost is the unexpired or unamortised cost at disposal.

Calculation:

1. Period of Ownership: 1 Jan 2020 to 31 Dec 2024 = 5 years.

2. Remaining Life: 18 years (original life) - 5 years (owned) = 13 years.

3. Unexpired Cost: £36,000 * (13 / 18) = £26,000

• Alternatively: Annual amortisation = £36,000 / 18 = £2,000. Total amortisation = £2,000 * 5 = £10,000. Deductible cost = £36,000 - £10,000 = £26,000.

Section C: Constructed Response Questions & Examiner's Comments

This section is challenging, and examiner comments highlight common weaknesses.

C1: Krute - CGT Planning & Payments on Account

Part A: CGT Advantage/Disadvantage of Disposal Date (3 marks)

Scenario: Krute sold shares for a £120,000 gain on 10 April 2024. Her income was too high for any basic rate band to be available for capital gains in either tax year. The question asks about the advantage/disadvantage of selling on 1 April 2024 instead.

Key Concepts & Solution:

1. Tax Liability: The gain would be taxed at the higher rate (20% for shares) after AEA, regardless of the date. No tax liability advantage.

2. Cash Flow & Due Dates: This is the critical point.

• Disposal on 10 April 2024 (Tax Year 24/25): CGT due on 31 January 2026.

• Disposal on 1 April 2024 (Tax Year 23/24): CGT would have been due on 31 January 2025.

• Conclusion: Selling on 1 April 2024 has a significant cash flow disadvantage, as tax is due a full year earlier. Delaying by 10 days postpones payment by 12 months.
  Examiner's Comment: Few candidates identified the due date postponement, a key consideration in tax planning around year-end.

Part B: Payments on Account (POA) (2 marks)

Scenario: Calculate POAs for 25/26 based on Krute's 24/25 income tax liability of £22,039.

Key Concepts & Solution:

• POA is based on the prior year's liability.

• CGT is excluded from the POA calculation.

• Each POA is 50% of the relevant prior year liability.

Calculation & Due Dates:

• 24/25 Income Tax Liability = £22,039

• 1st POA: 50% * £22,039 = £11,019.50, due 31 January 2026.

• 2nd POA: 50% * £22,039 = £11,019.50, due 31 July 2026.
  Examiner's Comment: Poorly answered. Common errors included wasting time re-calculating tax liability and incorrectly including Capital Gains Tax. POAs are for Income Tax and Class 4 NICs only.

Part C: Reducing POA to Nil (1 mark)

Scenario: Explain why Krute can claim to reduce her 25/26 POAs to zero without penalty, given her only income will be employment income, with tax fully collected via PAYE.

Solution: A taxpayer can reduce POAs if they expect their current year's liability to be lower. Since all of Krute's income tax for 25/26 will be collected at source through the PAYE system, her final self-assessment liability will be nil. Thus, no POAs are required.

C2: Michael - Trading vs. Non-Trading & Badges of Trade

Requirement: Explain four of the Badges of Trade (2 marks)

Key Concept & Solution: Badges of Trade determine if an activity is a trade (Income Tax) or a capital transaction (CGT). For 0.5 marks each, a brief explanation is sufficient.

1. Profit-Seeking Motive: Activity organized with the intention of making a profit.

2. Frequency of Transactions: A high number of similar transactions suggests trading.

3. Length of Ownership: Assets held for a short period indicate an intention to trade.

4. Supplementary Work: Work done on an asset to make it more marketable (e.g., repairing).
   Examiner's Comment: Generally well-answered, but some confused Badges of Trade with employment vs. self-employment tests.

Question Analysis: Individual's Tax Adjusted Trading Profit

This question required converting a sole trader's cash basis profit to an accrual basis profit for tax adjustment.

Key Adjustment Areas & Common Errors

1. Equipment: Under cash basis, plant and machinery may get a 100% deduction. Under accrual, capital allowances are claimed. If 100% Annual Investment Allowance (AIA) applied, the net tax effect is zero.

2. Car Expenses (Trickiest Area):

• Cash Basis: Claim approved mileage allowance.

• Accrual Basis: Claim actual car running costs plus capital allowances on the car's cost.

• Common Errors:

• Failing to disallow speeding and parking fines. These are not deductible.

• Forgetting to restrict expenses and capital allowances by the business use percentage (e.g., if 70% business use, only 70% of actual costs and CAs are deductible).

Question Analysis: Individual's Income Tax Liability Calculation

This six-mark question, while generally well answered, highlighted critical distinctions.

Common Errors in Liability Calculation

1. Pension Contributions: Incorrectly deducting the employer's contributions. Only the employee's own contribution is deductible. Employer contributions are exempt benefits.

2. Rent a Room Relief: Many were unaware of the £7,500 relief. Taxpayers can choose between:

• Method 1: Rental income less actual allowable expenses.

• Method 2: Rental income less the £7,500 relief.

3. Gift Aid / Charitable Donations: Treating as a direct deduction. Correct Treatment: Grossed-up Gift Aid extends the basic and higher rate tax bands, reducing tax at higher rates, not a direct income deduction (though used for Adjusted Net Income).

4. Savings Income Nil Rate Band: Incorrect application based on tax rate:

• Basic Rate Taxpayer: £1,000 nil rate band.

• Higher Rate Taxpayer: £500 nil rate band.

• Additional Rate Taxpayer: £0 nil rate band.

Question Analysis: Company Corporation Tax (Sling Ltd.)

This 15-mark question required calculating Taxable Total Profit (TTP).

General & Presentation Errors

1. Additions vs. Deductions: Confusion on whether to add or deduct adjustments. Exam Tip: Use negative signs for deductions in spreadsheets and sum.

2. Zero Adjustments: Explicitly show a zero for items in the question that require no adjustment, proving consideration.

Conceptual & Calculation Errors

1. Reading the Question Carefully (Key Error): The initial profit was stated as BEFORE deducting five listed items. Many candidates incorrectly added back disallowed items from this list. Correct Approach: Since items hadn't been deducted, only deduct the allowable expenses; disallowed items are ignored.

2. Capital Allowances:

• Annual Investment Allowance (AIA): Incorrectly claimed on a second-hand warehouse, building, or land. AIA is for plant and machinery only.

• Structures and Buildings Allowance (SBA):

• Exclusion of Land: The cost of land must be excluded from SBA qualifying expenditure.

• Time Apportionment: SBA is time-apportioned based on date building was brought into use, not purchase date (e.g., (Cost * 3%) * 5/12 for 5 months of use).

• SBA is generally not eligible for second-hand warehouses.

3. Interest Payable: Correct accrual calculation: Amount Paid - Opening Accrual + Closing Accrual.

4. Chargeable Gains and Group Structures: The question involved a parent (Sling Ltd.) and two subsidiaries (Up Ltd. and Down Ltd.).
   Comparative Structure: Capital Gains Group vs. Group Relief

5. Group Relief Amount (Common Error): Incorrectly restricting group relief by ownership percentage. Rule: Once a company qualifies, losses can be surrendered up to the lower of the surrendering company's available loss or the claimant's available profits, irrespective of ownership percentage.