CTA Part 1 common mistakes
CTA Part 1 · Understand the traps and how to avoid them.
Computes income tax by multiplying total income by a single rate, or applies the basic/higher rate bands to the total without splitting income into non-savings, savings and dividend streams in statutory order.
Revision notes often present one 'total income' figure, so candidates carry over the arithmetic shortcut of 'income x rate' and skip the statutory ordering and band-allocation steps that the exam actually tests.
What to do instead
Always lay out a columnar computation: list each income stream in the statutory order (non-savings, then savings, then dividends), allocate allowances in the permitted order, then apply the rate bands sequentially down the column so the top slice of each stream is visible. Rehearse this template until it is produced from memory in under five minutes.
Rolls National Insurance into the income tax computation, applying Class 1/Class 4 contributions to savings income, dividends or rental profits, or netting NICs off taxable income before applying rates.
Because NICs use similar-looking thresholds to the tax bands, candidates assume they share the same base and merge the two computations on the page.
What to do instead
Keep NICs in a physically separate box on the answer sheet with its own heading, and at the top of that box write the precise earnings/profits base (employment earnings for Class 1, trading profits for Class 4). Before calculating, tick which categories of income are inside that base and explicitly exclude savings, dividends and property income.
Starts the corporate tax computation from accounting profit and applies the rate directly, without adding back depreciation, client entertaining, capital expenditure and other disallowables, and without then deducting capital allowances and reliefs.
Candidates are fluent in reading a profit figure off a set of accounts and unconsciously treat 'profit before tax' as the taxable figure, especially under time pressure when the adjustment list looks long.
What to do instead
Never write a tax figure on the first line. Force a three-line pro-forma: profit per accounts, then a numbered add-back schedule (depreciation, entertaining, disallowable legal costs, capital items), then a deductions schedule (capital allowances, reliefs), and only then apply the rate to the adjusted figure.
Selects a loss relief claim by picking whichever relief gives the biggest saving, without first applying the reliefs that operate automatically and without checking the ordering rules between current-year, carry-back, carry-forward and group relief.
Loss relief is taught as a menu of options, so candidates jump to the 'best' option and overlook that some sets-offs are mandatory before any claim can be made, and that claims have time limits and restrictions.
What to do instead
Answer loss questions in a fixed sequence: establish the loss and its type, apply reliefs that arise automatically, then list each elective relief with (i) the amount it absorbs, (ii) the deadline for claiming, and (iii) the restriction that applies. Show the comparison as a small table before recommending one.
Calculates a gain on a disposal of shares by taking proceeds less the average cost of the whole holding, ignoring the same-day, then following-thirty-days, then share-pool matching order.
The pooling rules are mechanical and quickly memorised, but under exam pressure the familiar 'average cost' instinct from accounting takes over and the matching sequence is silently dropped.
What to do instead
Write the three headings 'same day / next 30 days / s104 pool' on the page before touching numbers, and allocate the disposal across them in that order, showing any unused balance carried into the pool. Treat the headings as a compulsory checklist, not an optional step.
Grants private residence relief in full on a property that was let, used for business or empty for part of the ownership period, or fails to bring in the final period of ownership exemption and the letting relief interaction.
Candidates recognise the relief name and apply it as a yes/no toggle rather than as a time-apportioned relief, and the ownership timeline in the question is long enough to discourage careful period-counting.
What to do instead
Draw a timeline of the ownership period first, marking occupied, absent and let periods in months, then compute the exempt fraction as exempt months over total months and apply the final-period rule as a separate line. Never state the relief without the fraction.
Treats every sale as taxable turnover for registration purposes, including exempt or out-of-scope supplies, and applies the threshold as a single historical test rather than both the backward-looking and forward-looking tests.
The threshold looks like a single number, so the distinction between taxable and exempt supplies, and between actual and expected turnover, is skimmed in revision.
What to do instead
Before testing the threshold, classify each supply in the question as taxable, zero-rated, exempt or outside the scope, and total only the taxable ones. Then run both tests explicitly - historic turnover over the past twelve months and forward-looking expectation of turnover in the next thirty days - and state the result of each.
Uses one deadline for everything in a compliance question, conflating the filing date, the payment date, the deadline to amend a submitted return and the window to appeal an assessment.
The exam contains several different time limits that are all expressed as periods of days or months, and candidates retrieve whichever one is most recently revised instead of the one the requirement asks about.
What to do instead
Maintain a single one-page time-limit table (filing, payment, amendment, appeal, claim, record retention) and reproduce the relevant row in the answer, labelling which event the date attaches to. When a question raises two events, quote two rows.
Advised only on the tax adjustment in an ethics or compliance scenario and stopped there, without addressing the penalty position, the need to correct the error through the appropriate disclosure route, or the obligation to escalate suspected money laundering internally.
Candidates treat ethics and administration as narrative topics to be 'known' rather than applied, and the calculation habit pulls attention back to the numbers.
What to do instead
For any scenario involving an error, an aggressive planning step or unusual client funds, answer under four fixed headings: technical position, disclosure or correction route with deadline, penalty and interest exposure with the behaviour category, and professional/regulatory obligation including internal reporting. Award yourself nothing unless all four headings are present.
Assumes a double tax treaty automatically eliminates double taxation, or claims relief by treaty without checking residence and source under domestic law first, and ignores the availability of unilateral domestic relief where no treaty applies.
Treaty networks are broad enough that candidates assume a treaty always exists and always wins, so the residence and source analysis is skipped and the credit is computed on the wrong figure.
What to do instead
Work in three steps before any credit: establish residence under domestic law, establish source of each income item, then check whether a treaty exists and what it actually says. Compute the credit as the lower of foreign tax paid and domestic tax on that income, and state explicitly what relief applies if no treaty is in force.