Business owners need to make time for non business matters

One of the things that I like to advise clients is that you need to ensure that you take time off away from the business to recharge batteries, maintain a fresh perspective, clarity of thought and make time for the personal dimension of your life – what some might call the work life balance. However, I was making the classic business mistake of focusing on providing a good business service, getting the work completed and responding to clients, not wishing to disappoint anyone – in effect I was not taking my own advice.

Unfortunately last week, one of our cats was put to sleep after a period of declining health, unfortunately medical interventions were unable to prolong his life. I took a day and half off work (which for those who know me is a long time) for some reflection and contemplation – I know it may seem bizarre to some but when an animal forms part of the fabric of your life, it’s premature departure makes quite an impact and my focus was not 100% for a short while. I am very fortunate to have great clients who understood and were flexible in moving deadlines, and an excellent staff team, my thanks again to them.

The law of unintended consequences occurred, the reason for the time off was not pleasant but spending a bit of time at home, away from a long day at work, e-mails, meetings etc. was re-energising and recuperative. I was able to clearly think through some challenging business issues and do what I always try to encourage others to do, i.e. space to think through, plan, evaluate and have a clear vision and mission. If anything, this brief period of time away from the office recharged my batteries, has made me more determined within my own business and I hope that I actually maintain the ability to create some time away from the hurly burly.

I may slip back into old habits, like the majority of business owners long hours are not always viewed as work in the conventional sense. Maintaining and growing a business requires time and tenacity, especially where the business is an employer. However, business owners need to maintain a sensible work-life balance whilst appreciating the need to have a clear plan

Contentment & achievement in business, work & life is more likely if actions are aligned to meet whatever your objectives are

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Posted on April 4th, 2013

REAL TIME INFORMATION: THE CLOCK TICKS

As a business advisor and tax professional payroll and PAYE is certainly one of those areas that have been subject to many procedural and legislative changes.  I was asked to write a piece for Arts Professional (one of the UKs leading arts  management publications), however this is a topic and issue that is of equal importance to all organisations .   We as an office are getting geared up for the change and appreciate the potential time pressures and anxieties it can cause, we   hope the article is of some use to alleviate the anxieties.

Introduction

Arts organisations, like all employers will be fully exposed to a dramatic change in the operation of PAYE and NIC, known as Real Time Information (RTI).  RTI is not optional and will eventually apply to all employers; its introduction is being phased in, it will be live for medium and large employers (50+employees) from April 2013, smaller employers will be bought into the scheme from October 2013.

The fundamentals of PAYE will be unchanged, for example, use of tax codes, status tests, deduction of tax and NI, if anything the HMRC spotlight will be shone on payroll operations.  One of the key drivers behind introducing RTI is that it will support the introduction of Universal Credit, available nationally from October 2013.

The main advice at the outset is to plan for the change, review (and modify?) your current data & HR procedures, inform your staff and don’t panic.  Payroll information will now need to be reported electronically, on or before any day when you pay someone.

The vast majority of employers must report their payroll information online using a Full Payment Submission (FPS) for each pay period, with effect from 6th April 2013; all employers are expected to be operating RTI from 6th April 2014.

Each time a payroll is run details will need to be submitted of:

  • deductions, such as Income Tax and NICs
  • starter and leaver dates if applicable
  • all employees paid, including those below the NICs Lower Earnings Limit (LEL)
  • all starter and leaver information (P45/P46)

In some limited instances, existing employers may be asked to submit a separate submission called an Employer Alignment Submission (EAS) before the first FPS is submitted.  This is to ensure that payroll records match with HMRC's (payroll alignment).   A separate EAS needs to be submitted prior to the first FPS for large employers or, those with complex payroll systems.

Additional submissions include:

  • National Insurance number Verification Request to verify or obtain a National Insurance number for new employees.
  • Employer Payment Summary (EPS) to report a reduction in the amount you pay to HMRC or if you haven't paid any employees in a pay period.
  • Earlier Year Update (EYU) to correct, after 19 April, any of the year to date totals submitted in your final FPS for the previous tax year. This only applies to years after you started to send information in real time. The first year an employer can use an EYU is 2012-2013.

PAYE Online

Employers will still need to be registered for PAYE Online, irrespective of RTI.  PAYE Online will still be needed because:

  • PAYE Online will still be used for sending in certain forms to HMRC such as returns of expenses and benefits, including P46 (Car), P9D, P11D and P11D (b).  This can be done directly from your payroll software if it supports this feature.
  • PAYE online will be used to issue tax codes and notices.  This can be done directly from your payroll software if it supports this feature.

HMRC have identified that over 80 per cent of data quality problems are caused by holding the incorrect information about an individual's name, date of birth or National Insurance number.

Examples quoted by HMRC as to the types of things that can go wrong are where:

  • An employee only works for you for a very short time
  • An employee gives two slightly different numbers
  • An employee doesn't have documentation demonstrating their correct number

Data accuracy is critical to the operation of RTI (and to avoid penalties), the information needs to be verified from an official source such as HMRC and/or Department for Work and Pensions (DWP) documentation; passport documentation; birth certificate; full driving licence (photo version)

On-or-before Payments (OOB)

The vast majority of employers and pension providers will be subject to OOB reporting requirements.  , i.e.  reporting PAYE information before payment is made.  There are some limited relaxations to this rule, where the OOB requirements are relaxed, this does not excuse the employer from having to report the payments, merely slightly delays the time.

RTI Penalties

There is still some ambiguity over the penalty regime, and we may expect some flexibility in the first year of operation, however HMRC has not stated its exact position over this.

This article first appeared in Arts Professional

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Posted on March 11th, 2013

Early Warning for Tax Evaders

Tax, as has often been quoted is one of the only certainties in life; tax evasion and avoidance have been with us since tax has been levied by government on its citizens.  For example the Window Tax of 1695, introduced by William III resulted in architects redesigning houses with fewer windows, householders bricked up existing windows.  This had a negative impact on the glass industry, and some believe that the phrase ‘daylight robbery’ originated from this.

Fast forward to 2013, the topic of non-payment of tax is still topical, albeit the spotlight, as far as the media are concerned is the big corporates who are the non-payers. 

This is not how HMRC see it and one of the purposes of this blog is to overview the current climate, how HMRC find tax evaders and avoiders, the consequences and suggestions as to how to deal with it.  I have used property investors and landlords as an illustration, the points raised are applicable to all groups of taxpayers.
 
Over the last 20 years that I have been involved in tax work and investigations I have seen a change in how HMRC operates; its increasing powers; its wide access to information; and the financial and criminal consequences of non-compliance.  HMRC is increasingly rolling out campaigns against certain groups of taxpayers; these have included doctors, dentist’s plumbers.  Its current   disquiet (amongst many) is second homes, where rental income may not be declared or capital gains tax paid in full when the property is sold. Other targeted groups include the self-employed, who either do not notify HMRC that they are working for themselves or do not declare all their earnings; those who sell items over the internet or at car boot sales, of which a large number are effectively "trading"; businesses and the self-employed who may not be charging VAT correctly, and who may not be registered.

Tax evasion, means doing illegal things to avoid paying taxes, for a property landlord/investor this would include not declaring rental income and/or property gains, abuse of the PPR regime, and  claiming expenses that had not actually been incurred.

The HMRC have a Designated Compliance Unit for property and in March 2013 they are planning to start a campaign using new data to target those who have profited through owning and selling second homes or multiple properties in the UK or abroad and have not paid their tax liability.  Tax inspectors have already targeted buy to let landlords with portfolios of three or more properties in the North West and North Wales.

How will this happen…?
Landlords and property investors need to be aware of the tax office’s (HMRC) increasing focused, intelligence based and assertive approach to tax investigations.  A significant investment in IT, better use of evaluating the immense amount of data accessible by HMRC (such as Land Registry documents, letting agents records, council tax records), additional HMRC staff, significant penalties for ‘non-declarers, wider media exposure and more use of the criminal courts significantly increases the likelihood of being investigated by the big beast that is HMRC.

It is believed that HMRC knows exactly how many owners are trying to sell which investment properties, their primary source of information is now becoming the internet which produces high grade information, not only of houses for sale or to rent but also of planning applications in relation to proposed house conversions which are then sold at a later date producing a potential CGT liability.

How does the tax office know what I am up to?

HMRC has an incredible range and depth of information sources which can be used to uncover tax under-declaration, examples relevant to property landlords include:
• The ‘Northgate Public Services Information System’ database which contains details of housing benefits paid to landlords by any UK local council
• Land Registry documents, Land Registry searches are the main source of information relating to home and land ownership, mortgages, charges, easements, restrictive covenants, property boundaries, rights of way, past ownerships and house prices.
• Electoral Rolls
• Council Tax records
• Mortgage applications
• Letting agent client records
• Information provided by third parties
• So called “schedule 36” information notices, which are legally enforceable notices used to require information (about let properties) to be released by letting agents, insurers, Council Tax offices, tenants, Housing Benefit offices and Estate agents.
• Banks and building societies, they are required to provide details of accounts on which interest is paid over a certain amount. 
• Planning applications in relation to proposed house conversions which are then sold at a later date producing a potential CGT liability.
• Inheritance tax returns, indicating second properties passing under a will
• Looking at and interrogating websites, such as ‘Rightmove’, this site provides the sale and rental information for a property, and an estimate of the capital appreciation of a house since the last transaction
• Increased sharing of information across government departments and overseas institutions
• The Internet
• Bringing in outside expertise from the financial services industry, academia, and the credit reference agencies

How does HMRC use the information used?
Advances in technology and the effective use of date-mining techniques have yielded positive results for HMRC at the moment, and is likely to increase as their skills and competency levels improve.  For example, a check with a credit agency such as ‘Experian’ will show details of loans and mortgages of the taxpayer and people they are connected with as well as identifying any linked addresses.

Bank details may confirm the opening of a new bank account in which a large amount has been deposited. If this ties up with an entry on the Land Registry following the sale of a property, this could possibly mean that a chargeable gain should have been declared on the tax return.
Data mining of the Land Registry can provide me properties sold and acquired by individuals; this can be cross referenced to what if anything is held for that individual in terms of tax records and returns.

HMRC has a new computer system based the Valuation Office Agency in Worthing, West Sussex.  This system brings together information formerly based in District Councils and enables the comparison of data collected such that for example, an HMRC inspector can request a search to provide an historical list of all properties purchased by a landlord, or in some cases members of the landlord’s family.

This list can then be compared with declarations made on the CGT pages of personal tax returns. Properties sold within short timescales are therefore easily identifiable and tax return declarations easily checked. HMRC have had such success with their new system that they have formed a designated compliance unit tasked with targeting ‘tax evading’ property developers and ‘buy to let’ landlords.

How do they choose who to investigate?
Random selections are not that common, more often than not HMRC use a risk based approach to selecting cases for investigations.  The likelihood is that if HMRC contact you to ask questions, it is highly likely they have built up a profile of your financial conduct and behaviour.   

For example, in their publication ‘Closing in on tax evasion’ HMRC, via third party data identified an individual who was found to have 11 undisclosed properties in several Mediterranean countries. The total cost of the properties exceeded €1.3 million despite the individual declaring UK income of just £6,000.

As part of a campaign aimed at medical professionals, HMRC’s computer system ‘Connect’ helped make the links between tax records and data from hospitals, pharmaceutical companies and insurers. This resulted in £33 million in unpaid tax being recovered so far including one case of £1.2 million.

Should I stay hidden or come clean?
I have dealt with a whole range of clients over the years regarding tax evasion and in the vast majority of situations they are not hard-bitten criminals but people who have got trapped in a viscous cycle.  They may not have been initially aware of the need to declare, received incorrect advice or have been meaning to declare income and/or gains but did not get round to it.  As time goes by they get in the habit of not making a declaration but now become worried and anxious regarding the consequences of non-declaration – the advertising campaigns by HMRC are certainly, dramatic and hard hitting and do not help in this respect, but I can understand HMRC’s motivation in doing so.

There are effectively two choices, do nothing and see what happens.  There is a possibility that you may never be discovered, more likely if you are invisible, do not legally exist, have no NI number and every financial transaction you have done is in cash, there is nothing recorded about you in the public domain and you do have not an electronic footprint.  If you are caught, then penalties will be applied more heavily and subject to the nature of the evasion, criminal prosecutions and custodial sentences are more likely.

My opinion is that a voluntary declaration (ideally managed and dealt with by a tax professional) is the best route forward.  The financial consequences will be less, certainly as far as penalties are concerned.  It is the personal impact that is as beneficial, in every case that I have dealt with over the years all my clients have felt such a burden lifted, and even there will be a financial consequence the pain is manageable and they   do not have to worry about the nasty letter or knock on the door.

If I am affected what should I do now?
If you are concerned that you may have undisclosed tax liabilities you should take expert advice on liaising with HMRC, either speak to your existing accountant or contact me at mahmood@proactiveresolutions.com

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Posted on January 26th, 2013

Goodbye 2012, Welcome 2013

I find the Xmas break an enjoyable one, not just from the point of view of seeing friends and family, eating, socialising, enjoying the quiet roads and being able to take a few days off from the frenetic activity of running a business.

This time of the year gives me a chance to reflect on the year gone by and plan (i.e. put pen to paper, or keyboard to computer) in preparation for the years ahead.  I can take advantage of the relatively quiet time – with most of staff having a deserved break – to review the past, plan and re-energise for next year.

Two things that help us to deal with the continuing challenges of the present and future is in the quality of our planning and thought process.  Planning is an essential discipline, however it is applied, albeit the exactness of the plan may not happen, the thought processes it involves are important.  For example, consider business plans, of which during 2012 I was involved in developing and assessing a number.  Business plans represent (in words) the journey that we are going to make, informing our ‘audience’ as to why we are making the journey (mission), what we wish to get from that journey (objectives), the people we wish to visit (clients), the route we wish to take (how to), our ability to make such a journey and the terrain out there (financial and other risks).

We know that one certainty is that the reality will not match the reality of the actual business journey.    However, this does not relegate planning to a redundant activity, the process of producing the plan enables us to look at the journey through a wider lens and not the narrow focus of just our skills and experiences.

My general approach to ‘business’ is to identify and maintain core underlying activities, whilst developing additional services & products.  At the end of 2012 I have achieved some things that I set out to achieve, been involved in work that I had not anticipated (unforeseen but welcome opportunities), but core activities help sustain the business.

One of my wishes for 2013, apart from the obvious desires for world peace, food and shelter for all, and business success is a new approach of better quality, integrity, thought, discussion, consideration & application by policy makers & media. Critical, objective thinking & analysis that is deemed important in our business & working lives seems to be abandoned and ends up in a cul-de-sac when it relates to wider societal issues.

Very best wishes for 2013

 

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Posted on December 31st, 2012

Self Assessment Deadline and Counting

Winter months are taking their grip, the end of the year is approaching, festivities are building up slowly and (at the date of writing this article) there are 46 days before the Self Assessment (SA) deadline – by which time the 2011-12 tax return has to be filed, and any balancing payments and payments on account have to be paid. 

It would seem appropriate to outline some important points about SA, with particular reference to the property landlord, albeit a number of the points are relevant to other taxpayers..

Requirement to be part of Self Assessment

If an individual only has income from non-PAYE sources, such as income from renting properties then a tax return will need to be completed if all of the following apply:

  • you have income to declare, for example income from savings, trusts or abroad, rental income from land or property
  • your total income exceeds your total allowances and reliefs
  • you have tax to pay on this income 

The completion of a tax return will be required if a taxpayer wishes to claim any loss reliefs. 

Record keeping

Taxpayers are under a legal duty to keep sufficient records to back up their Self Assessment submission.  HMRC take this matter very seriously and are continuing with (redesigned) business record checks.  Their selection criteria are based on risk assessment; cash based businesses being more likely to be selected for business record checks. 

For income tax purposes, HMRC advise landlords to keep details of: 

  • the dates when you let out your property
  • all rent you get
  • any income from services you give to tenants (eg if you charge for maintenance or repairs)
  • rent books, receipts, invoices and bank statements
  • allowable expenses you pay to run your property (eg services you pay for such as cleaning or gardening) 

Taxpayers must retain records for a certain length of time, for example, for a 2011-12 return filed on or before 31 January 2013, records must be kept until 31 January 2014. 

Income tax

Tax is payable on the net rental ‘profits’ of the property, effectively rental income due minus any running costs that are incurred in connection with the letting of the property. 

Details of what can be claimed have been discussed in previous articles, remember that tax allowable costs must normally be “wholly and exclusively” for the purpose of the rental business.

Capital gains tax

Property gains are calculated by deducting the capital costs from the value of the disposal, the disposal is normally by sale or transfer; net gains will be after further deduction of capital losses and the annual exemption of £10,600 for 2011-12. 

Tax rates 2011-12

Income tax is payable at 20% on taxable rental profits up to £35,000, 40% is payable on the excess and an additional 50% on profits over £150,000.  

Net capital gains will be taxed according to the ‘income tax’ status of the taxpayer, 18% for ‘basic rate’ gains, and up to 28% if the taxpayer is a ‘higher rate payer’, a higher rate taxpayer is one who has a gross income in excess of £42,475. 

Capital gains tax reliefs

These include capital losses and the annual exemption, are the principal private relief (PPR); letting relief (gains up to £40,000 tax free); transfers to a trust, non residence and death of the individual. 

Paying HMRC

It is vital that taxpayers do not miss payment deadlines, HMRC are more flexible in the methods of payment and encourage internet and telephone payments, if this method is adopted it is important that the correct bank accounts and number formats are adopted.  HMRC have updated their own website to include a lookup tool that sets out which bank account to use and the required format to use for the reference numbers. 

Problems paying

Do not impersonate an ostrich and contact HMRC at the earliest arrangement and negotiate a time to pay.  Payment plans are not guaranteed, and will be dependant on a number of factors, such as level of tax owed, affordability (evidence may be required), previous tax history.  HMRC have certainly been more assertive in collecting tax and are under increasing political pressure to be more so.  HMRC more readily move to legal action for uncollected debts, having the use of (currently) 11 private debt collection agencies. 

Keep warm, have a great festive period and happy Self Assessment.

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Posted on December 15th, 2012

Memberships

The end of the year is approaching, our minds will eventually wind down to hopefully embrace the Festive period, enjoy a few days of R&R and keep the in-tray at bay.

This is also a time of year that for many of us provides a time for reflection as well as celebration.  We look back at events in the past year, at our challenges and achievements; we look forward to the New Year, and resolve to do some things differently.    Some resolve to lose weight or to give up smoking, others resolve to grow their business or improve their performance at work.

For those of you working in organisations such as businesses or membership organisations this may involve new markets, or employing new staff.  In our difficult economic climate it may mean finding better and cheaper ways of doing things that will create new opportunities.

In my Autumn blog I announced the creation of some new resources for membership organisations.  We are now building on this by conducting a survey of membership organisations to discover what kind of information we can offer that will be valued in the coming months.  What are your priorities for the coming year?  What difficulties and opportunities do you envisage?  Where will you focus your resources?  Whatever the answers to these questions, Pro Active Resolutions is here to help.

If you receive an invitation to complete our survey, please do help us and we will let you know the results in January.  We want to ensure that we can support you with the right resources

If your New Year’s resolution involves improving a membership organisation, or improving your own skills in membership management, please keep us in mind as a source of support.  We want 2013 to be a successful year for you!

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Posted on December 4th, 2012

The power of individuals and knowledge

I am very fortunate that my working and professional life enables me to engage with a range and variety of individuals and organisations. This engagement process reinforces the importance to me of empowering, enabling and developing an individual’s capabilities and competences. Human beings still mainly determine sustainable success and achievement, not just reliance on technology or processes – the banking sector demonstrates this.

We are pleased to reveal our new Facebook tab, at http://on.fb.me/Lc7K8m linking to information about us and the support and resources we have available.

The journey to create this tab has certainly been a learning curve! Having had a page designed, we were almost ready to launch the tab in March and then Facebook applied something new…Timeline. We were no longer able to implement our new landing page and we had to rethink what to do.

Undeterred by this, the landing page was redesigned to cover more of what we offer, with links to all our study and support resources for sole traders, businesses, learners and the creative/charity sector.

The page has been redesigned to reflect the layout of our website, with links to the same four ‘zones’, we hope that you find it informative and useful.

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Posted on July 1st, 2012

Cash and survival – it's a question of control

The vast majority of businesses and freelancers  face a delay between generating income and subsequently receiving the cash, example sources being from sales, fees, grants, sales, grants and donations.  From a financial perspective cash is critical in the short, medium and long term; weak control will lead to a lack of sustainability.

The subject of credit control is a critical topic, and is an issue that is vital to business start-ups and established ones; unfortunately it is a management issue that is not prioritised as much as it should be.  Survival, sustainability and growth is determined by adequacy of cash flow, not necessarily generating profits/surpluses.

If cash is not pulled in on time to (at least) meet cash debts then sustainability is normally maintained by additional borrowings and/or payment delays of debts – whether it can continue to be maintained is a separate issue.

There are effectively two stages to the management of credit control, namely the initial granting of credit facilities and its subsequent management.   Granting credit always carries an element of risk (of not receiving the cash), credit control is about the management of that risk.

Clients should be assessed for their credit worthiness (credit scoring), the size and status of the client is not a determinant of their credit worthiness, large organisations are as likely to default as small ones.

Credit scoring can be carried out using trade and bank references, Companies House information, county court register, client visits, rumours, first impressions and credit reference agencies.  The internet is a useful tool in credit scoring and one has an access to a large amount of relevant information and credit ratings.

Written agreements should be drawn up starting the terms and conditions of payment, for example, number of days to pay, interest charges on late payments.   This is important if legal action is to be pursued, and helps maintain financial discipline.

Once the invoice is issued then call the client within a few days (as part of a “post sales” review) to check that the client is happy, that there are no problems and that the invoice was received (and by the correct person/department).  If payment is not received by the due date then reminder letters/faxes and phone calls need to be made, the letters or faxes will go up in severity from the “friendly” to potential court action – at this stage client relationships would have deteriorated – court actions can be instigated online and are procedurally efficient.

Technology can play an important part in credit control, for example the issuing of invoices via e-mail, setting up time alerts (Microsoft Outlook), and the production of credit reports showing outstanding invoices and days outstanding.  Electronic delivery methods will quicken the collection processes, provide confirmation that the invoice was sent, and save money on consumables and postage.

 

 


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Posted on June 4th, 2012

Exam preparation: Maximising your chances of success

Learning, training and studying is a large part of my working and business life, in this blog I want to focus on exam based qualifications, specifically question practice – a critical part of exam preparation & essential if students wish to maximise their chances of passing.   

Ultimately practising questions is the best way to demonstrate to yourself how much of an understanding of the subject you do actually have.  However, a number of students practice questions in the wrong way and consequently do not learn or acquire understanding from their endeavours. 

Question practice should be done in such a way that it simulates what the real exam scenario will be, i.e. no access to books, colleagues or the actual answer – individuals will be answering questions without any ‘safety net’, it is vital that students practice questions without referring to the answers before they fully complete their attempt.  The more imaginative student may request their friends or partners to act as exam invigilators, though some may consider that excessive.

A significant number of students will start a question, get stuck – due to a number of reasons, ranging from trying to understand the question to ‘blank’ memory, whatever the reason a brick-wall has been encountered.  It is critical that students learn how to get over that brick wall if they are to be successful.  This approach is initially a difficult one to adapt to (that temptation to look at the answer before completing the question is very strong).  In my experience students learn at a faster rate using this technique and can more easily identify their areas of strength, and ones that need more work.  A student of mine who used this approach for the first time said “My head did hurt! In fact it almost exploded, lol, but I persisted and I’m not doing that bad.

Before we explore the technique in detail it is useful to take a look behind the scenes as to how the majority of examiners set exams and how they will be assessed and marked.  Exam questions will (a) reflect the learning outcomes contained in the attendant subject syllabus; (b) the final answer in a question will require a student to complete a number of differing tasks/stages in order to get to the final answer; (c) the examiner will have produced a marking scheme for each question outlining the allocation of marks within that question; (d) most exams are not negatively marked, i.e. marks are not taken away for incorrect answers (medicine, thankfully is an exception); (e) marks are predominantly based on methodology and students own numbers; (g) the primary objective is to demonstrate understanding and not necessarily getting the correct answer.

To illustrate this technique let us use the example of a question which asks us to (say) calculate the gross profit of a product, compare it to last year and make suitable comments.  This question will require the student to perform a number of individual tasks in order to get to the final answer.  Gross profit is the difference between sales and cost of sales.  In order to achieve the full marks the student will need to identify/calculate (1) the sales figure; (2) the cost of sales figure; (3) be able to calculate the difference between (1) and (2); (4) compare the gross profit to last year; (5) make suitable comments. 

The examiner will have allocated marks for each of these aspects; the number of marks will be based on the complexity and difficulty of each task set.  If the candidate incorrectly calculates the cost of sales then full marks will not be awarded for this part of the task; however if the student then subsequently uses their cost of sales figure in the correct manner, i.e. subtract their cost of sales figure and makes appropriate comments (on their own figure) then full marks can be awarded for that part of the task.  As far as the examiner is concerned the student has demonstrated a correct understanding of how gross profit is calculated and how it is interpreted. 

When practising this technique a student should attempt the question from start to finish, if the ‘brick wall’ is encountered then take an educated guess, and proceed accordingly.   When the task is finished review your answer against the published answer as though you were a market, tick the parts of the answer which are numerically correct and using own figures, circle or mark those which are incorrect. 

Try to obtain past exam or exam styles questions and work through as many as possible, ultimately putting more pressure on yourself by timing yourself (In a 3 hour exam a question worth 10 marks has as matched time equivalence of 18 minutes!), not competing the paper and poor time management is another major reason for failure.

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Posted on May 6th, 2012