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Study Zone

Pass the CTA OMB Advisory exam

Nitin Rabheru offers advice on how to pass the Taxation of Owner-Managed Businesses paper

November 2016

Be prepared:
• Your revision should cover the breadth of the syllabus, as any topic can be examined and all questions are compulsory. Make sure you know the basics – the fundamental calculations, proformas, layouts and tax admin.
• Deal with those difficult topics you find problematic, such as partnership CGT and change of accounting date. When practising questions refer back to the study manual or contact your tutor for support.
• You need to ask yourself, have you made a real effort to understand all areas of the OMB syllabus, including the admin? For example, do you know the key tax differences between unincorporated businesses and companies with regard to loss relief, cash extraction options and owner exit?

Different business structures:
You need to have a good understanding of the tax implications that can arise under each of the different business structures. For example, in a close company scenario, the tax treatment relating to the provision of taxable benefits, loan advances and waivers will depend on whether the individual is an employee, shareholder or working shareholder.
The qualifying conditions for entrepreneurs relief vary significantly depending on who is making the material disposal. Sole traders and partners only need to be in business for 12 months. However, a shareholder will need to own 5% minimum in a trading company for 12 months whilst working for the company. The associated disposal rule only applies to partners and working shareholders.

Effective use of legislation and case law:
Ensure you have a good understanding of case law in relation to badges of trade, employment factors, definition of plant and machinery and revenue vs capital. Also highlight useful sections such as partnership CGT, successions, capital allowances and R&D.

Give advice in the exam:
The examiners are not just looking for a display of knowledge – they want to see how well you can apply rules and conditions to a scenario. Think about the tax impact on the business, state the relevant claims and elections as well as a suitable recommendation if relevant.
Scenario based revision
You cannot pass the exam by just learning your notes or the study manuals. You have to develop your application skills by practising questions. I always recommend students prepare a revision folder split into different sections for each type of business structure.
For example, for sole traders, typical scenarios would include badges of trade, cash basis, incorporation and disincorporation. By adopting a scenario based approach you can then concentrate on what is important.
It will help you to note any traps you have fallen into. The more mistakes you can make from each question/scenario will increase your chances of passing the real exam.
• Nitin Rabheru is a tutor at BPP’s OCR Live Faculty

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