AF2 Business Financial Planning – The October 2017 Exam Paper Uncovered

It’s the turn of AF2 the Business Financial Planning module and the scrutiny of the October 2017 exam paper. This is useful reading for those studying for their CII AF2 exam.

If you haven’t seen it yet, here is the link.

Question 1

The first question this time concerned Gerald, aged 60, and the sole shareholding director of a small company with 8 employees.  Gerald is considering winding up the company or finding a buyer.

Out of the 7 questions (from a – g) only one was a calculation; for 8 marks, students had to calculate the amount of statutory redundancy pay for one of the employees.  The rest of the questions were all theory, the first two covering the business reasons why a competitor might wish to buy the business and an explanation of why it might be preferable for Gerald to sell the shares and business premises and an explanation of how the proceeds will be taxed.

The exam continued with testing of employment law and how both buyer and seller must comply with TUPE, the Transfer of Undertakings (Protection of Employment) Regulations 2006.

The rest of the questions were on a ‘pre-pack’ arrangement where students had to describe how one works, the advantages to Gerald and the disadvantages to the buyer.

The last question covered the IHT implications of Gerald’s’ will taking into account that he is not married to his partner and the tax implications for a trust.  These two issues were only for 5 marks.

Question 2

This question started with a smaller case study, this time a sole trader with recent employees and commercial premises to purchase.   The questions seemed straightforward starting with a calculation to work out the total cost of buying the business and it continued with another calculation, this time on the maximum pension contribution Steve could make, the advantages of his buying the property through a SIPP and finally, now he has employees, what his auto enrolment responsibilities are.

Question 3

The final question concerned three engineers who wanted to set up on their own.  The questions were around the four legal forms of business, business protection and which would be appropriate given the circumstances in the case study.  There were also a couple of calculations on income tax and corporation tax.  AF2 students know these topics will be tested and so there should be no excuses for not getting the fundamental facts right.

Comparing with April 2017’s AF2 Exam Paper

Let’s compare this paper with the previous one.

Question 1 was, as is usually the case, an interesting scenario made up this time of 3 shareholding directors in a firm with 15 employees.   The questions were on a wide variety of topics including different financial ratios, SSAS funding, wrongful trading, voluntary liquidation and administration process, pensions and bankruptcy, and finishing with areas of employment law.

Question 2 covered the well-trodden path of shareholder protection and key person and question 3 introduced us to two employees planning on starting their own business; questions involved self-employed tax and the best year end to choose; business structures and contract terms.

Historically, the pass rates for AF2 have been low, so we will be keen to see how students in 2016 did.  As with all advanced exams, it’s all about the application of the knowledge – so students should study as many past exam guides as they can and read the examiner’s comments as these are so useful to pick up where candidates went wrong and tips to stay on track.

Grab the resources you need!

If you’re studying for your CII AF2 exam, and you’re wanting to feel prepared on exam day, you’ll need to practise applying the knowledge. Grab our free taster to try out one of Brand Financial Training’s resources for yourself.  Click the link to download the AF2 calculation workbook taster now!

Over to You…

If you’re planning on sitting AF2 in the near future, which areas do you think will pose the greatest challenge for you?