Sitting AF1 this April? Here’s our view on the last CII AF1 sitting
The exam paper for the October 2014 sitting of the CII AF1 exam has been released. In the following article we take a look at what was covered and we give you pointers on how you can approach your studies for the next exam sitting.
The AF1 paper consists of one main case study worth 80 marks and two shorter case studies with 40 marks each.
The Main Case Study
The main case study in last October’s paper (which can be found here: http://www.cii.co.uk/media/5621498/af1_october_2014_qp.pdf ) tested candidates’ knowledge, understanding and application of both income tax and inheritance tax.
What Was Required of Candidates in October’s Sitting
Candidates were required to perform a range of calculations including:
- the grossing up of dividend income
- applying the correct tax rate to different types of income
- working out the estate on death
- applying taper relief and
- using the transferable nil rate band.
In addition, candidates had to explain the rules relating to:
- furnished holiday lettings
- business property relief
- pre-owned asset tax
- qualification for the reduced rate of IHT through charitable gifting
- making a valid will and
- revoking a will.
The Shorter Case Study
The shorter case studies focused on trusts, including their taxation, calculating capital gains tax, capital allowances and national insurance contributions for a sole trader.
Two Key Takeaways for April Exam Candidates
For those sitting this April, there are two key messages to be taken from the last two sittings of AF1.
The first is to use the tax tables available to you in the exam (and make sure you familiarise yourself with them beforehand to save you time on the day). Some candidates are still missing out on easy marks by either stating or using incorrect tax rates. These rates are given in the tables.
The second message is that candidates struggle more with the trust questions, particularly the taxation of trusts, than they do with other questions. So, make sure you’re clear before the big day on how each type of trust is taxed from an income tax, a capital gains tax and an inheritance tax perspective and who is liable.
Some Curve Ball Questions
The October 2014 paper featured a couple of ‘curve ball’ questions which were felt to be more challenging than usual.
Candidates were asked to identify the three components of an estate used to calculate its qualification for the reduced rate of IHT due to a charitable gift. This content is not covered in any of the CII’s texts, however it is readily available on HMRC’s website. This highlights the importance of wider reading to candidates sitting the AF1 paper. Remember, you’re not being tested on the content of the text books, but on the learning outcomes stated in the syllabus.
Our second ‘curve ball’ asked candidates to identify the circumstances that could result in the loss of BPR in respect of shareholdings in an unlisted company. Ordinarily, one might expect to be asked to list the conditions for shareholdings in an unlisted company to qualify for BPR, so this slightly different approach may have caused confusion in candidates who were less sure of their knowledge.
AF1 has tended to be a fairly predictable exam insofar as candidates have always been expected to do an income tax calculation. In addition, it would be unusual for a paper not to require the candidate to perform an IHT, a CGT and some form of investment calculation.
The examiners also seem to have a bank of questions that they like to use time and time again. In the October sitting we saw the furnished holiday letting rules and trustee duties being tested. Back in April it was the actions a client could take to establish a new domicile of choice and the powers and responsibilities of trustees.
The answers to all of these questions can be learned by rote. Time spent memorising these before the exam frees up thinking time in the exam, giving candidates more time to spend on performing (and checking) their calculations and on questions that require a more in-depth level of thinking.
Further Points to Note
For those of you sitting in April there are a couple of further points that you might want to take note of.
- The CII has stated that they will be testing the changes to inheritance and intestacy rules which came about as a result of the Inheritance and Trustees’ Powers Act 2014 from the April 2015 examination onwards.
- The residence and domicile rules were not tested in October 2014 but did come up and were identified as a weak area in the April 2014.
Also, for your convenience, here is a link to the page where you’ll find the syllabus:
Click on ‘syllabuses’ on the right hand side.
Show Your Work
Finally, remember to show your workings for each of your calculation. Marks are available for each of the steps in the calculations but these cannot be given if the examiner cannot see those steps. So, show your workings and get those marks. Even if you get the final answer wrong because you’ve missed something out you’ll get credit for what you have done right.
Grab the resources you need!
If you’re studying for your CII AF1 exam, and you’re biting your nails to the quick, worrying about doing poorly on the day, grab our free taster to try out one of Brand Financial Training’s calculation workbooks for yourself. Click the link to download the AF1 Calculation Workbook taster now!
Over to You…
What do you think about the curve ball question on IHT? Do you make a point to include wider reading in your revision?