Friday Five – 16 February – 5 Questions in 5 Minutes

Welcome to this week’s Friday Five – 5 Questions in 5 Minutes Every Friday

What’s this all about?

It’s a bit of Friday Fun where we provide you with 5 questions relevant to a mix of CII exams. The challenge is for you to answer them in 5 minutes. Answers at the bottom of the page.

Questions

These questions relate to examinable tax year 2017/18, examinable until 31 August 2018.

1. What is the tax position for a basic rate tax payer with savings in a deposit account?
   1. Interest paid gross, tax charged at 20% once £1,000 personal savings allowance used
   2. Interest paid net, tax charged at 7.5% once £5,000 personal savings allowance used
   3. Interest paid gross, tax charged at 20% once £500 personal savings allowance used
   4. The bank or building society will automatically deduct tax, basic rate tax payer has no further tax to pay

2. If an investment trust company chooses to use the optional framework to allow them to invest in interest bearing assets in a more tax efficient way, the effect on individual investors is that they:
   1. still receive a 10% income tax credit on received dividend distributions
   2. face broadly the same tax treatment as if they had owned them directly
   3. are not liable to capital gains tax on any disposals of investment company shares
   4. will be entitled to receive dividend payments more frequently

3. Adrian transferred assets worth £150,000 into a trust, in which he has no interest. If he had sold the assets he would have made a gain of £40,000. If holdover relief was claimed what effect would it have on the trust?
   1. Holdover relief is not available as the value of the gift is below the nil rate band
   2. There is no CGT at the time of the transfer but the acquisition cost of the trust is reduced to £110,000
   3. Adrian has no immediate CGT liability but he would be liable to CGT on the trust’s periodic review
   4. The gain is liable to CGT by the trust at acquisition and not on Adrian at disposal

4. In making your client aware of Pension Contribution Insurance (PCI) on his newly established defined contribution scheme, you correctly advise him that: Tick all that apply.
   1. premiums will be eligible for tax relief.
   2. in the event of illness, the PCI will make contributions to the member’s scheme.
   3. both member and employer contributions can be covered.
   4. payments will begin after an agreed deferred period.

5. Which of the following features is usually covered in a health cash plan?
   1. Respite care
   2. Hospital stay due to an existing condition
   3. Cost of treatment or reports
   4. Professional care benefit

Answers

1. A – See R01 Study Text, Chp 2
   Grab our taster mock exam paper for CII R01. Click here to download.

2. B – See R02 Study Text, Chp 6:1
   Grab our taster mock exam paper for CII R02. Click here to download.

3. B – See R03 Study Text, Chp 3
   Grab our taster mock exam paper for CII R03. Click here to download.

4. BCD – See R04 Study Text, Chp 5
   Grab our taster mock exam paper for CII R04. Click here to download.

5. D – See CF8 Study Text, Chp 4
   Grab our taster mock exam paper for CII CF8. Click here to download.

How did you find this week’s questions? Did you complete them in 5 minutes? Did you get them all correct? Do you disagree with any?

Do let us know by leaving a comment below – we promise to read them all. (Humour particularly appreciated on a Friday!)