During the Masters examination time I was very curious to know what the taxation of incomes question would be asked. I thought it would be a very straightforward examination that would not be too difficult to answer. I also knew that all the Masters students would have already done a lot of research and so would have very sound arguments for their points of view on taxation of incomes. So, what I didn’t know was that the taxation of incomes area was so confusing that the taxation of incomes questions would almost certainly be asked during the Masters Examination!
So, I decided to really go through the taxation of incomes topic very carefully. I prepared a great deal by reading as many articles as I could find on the subject, asking fellow students, asking my consultant, making notes and finally drawing up a working document with my very own notes on it. What I found was that even though there were probably a hundred things I wanted to say during the examination, not one of them was likely to make the cut. The actual examination asked a lot of the same questions and so it was impossible for any of my assumptions to stand up to scrutiny. It is at this point that I decided I had to really take my own time and prepare for my examination.
But then, the actual examination proved to be much more difficult than I had anticipated. The three main areas that the taxation of incomes candidates would be expected to know about were dividends, capital gains tax and self-employed expenses. But then I discovered that I actually didn’t know anything about these three items! That’s when I realised that I would probably have to do quite a bit of work if I was to succeed in the examination. It was at this point that I decided to hire a bookkeeper to help with my preparations. Unfortunately for me, she turned out to be more expensive than I had originally envisaged.
However, the one area that I was still certain I would get some valuable answers to was the taxation of dividends. It is in this area that many candidates find themselves at a real disadvantage. This is because they assume that they will receive a dividend tax refund when they are not entitled to one. In fact, this assumption can never be substantiated in law as no tax should be charged on any dividends whether you received them or not.
This is why it is so important for individuals and small business owners to understand the taxation of dividends and other similar income types. If you were to allow your accountant to prepare your returns for you, he/she would advise you that the only times you would be liable to pay tax on your dividends would be when you were making an investment in a company that did not generate an income. This of course, would exclude a vast number of small businesses. It is for this reason that most tax lawyers insist that their clients obtain the tax accounting advice required before making any investment decisions. Only then can the accountant provide you with a correct and comprehensive run through of your available options.
The majority of professionals would also recommend that their clients get hold of a CPA (Chartered Professional Accountant) or CFA (Chartered Financial Analyst). Either way, there are certain advantages that come with engaging the services of a qualified professional. These would include the assurance of impartiality which would ensure that you have someone who is not going to favor one particular set of interests over another. In addition to that, these people would have access to the resources that you would not have access to yourself, thereby ensuring that the examination process is completed in an expedient manner.
There are two examinations that are specifically designed to test the candidate’s knowledge of personal taxation. The first of these is the Single Parent Tax Credit Examination which is designed to test a person’s knowledge of tax laws applicable to sole proprietors and partnerships. The second is the Married Couple’s Tax Credit Examination which tests the individual’s knowledge of tax laws applicable to married couples. The examinations are administered by different bodies in each country and would normally have been designed by a professional tax assessor who has experience in administering similar tests. If you wish to take my exam for me, these two examinations are the ones that you should focus on in order to prepare effectively for the exam when it comes back.