Friday Five – 20 April – 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

IMPORTANT!  These questions relate to examinable tax year 2017/18, examinable by the CII until 31 August 2018.  They do not relate to tax year 2018/19 which is only examinable by the CII from 1 September 2018.

1. The Aldermanbury Declaration commits which of the following financial services sectors to a common framework of professional standards?
   1. Life
   2. General
   3. Pensions
   4. Investments

2. Ironstone has retained profits of £750,000 after paying £175,000 in dividends (each) to both their ordinary and preference shareholders. What is their dividend cover?
   1. 3.29 times
   2. 4.29 times
   3. 6.29 times
   4. 5.29 times

3. Why might an offshore fund with reporting status be preferable for a UK investor than one without?
   1. Any gains on disposal are subject to normal CGT rules and taxed at 10% or 20%
   2. Investors can roll up gross income until they are liable for income tax at a lower rate
   3. Income can be accumulated in a low tax environment
   4. Tax is only payable on distribution of income or encashment

4. Which of the following risks would apply to the drawdown pension option your client is entering into? Tick all that apply.
   1. The underlying annuity rate will increase during period of deferral in drawdown.
   2. Potentially high charges for administration/reviews.
   3. The value of the fund can go down as well as up.
   4. Depletion of fund through high-income withdrawals.

5. Betty, a higher rate taxpayer, has purchased an immediate needs care plan to part-fund her domiciliary care costs. She has arranged for the benefits to be paid directly to her as she uses a number of care providers. How will the benefits be taxed? Assume she has no personal savings allowance remaining.
   1. The capital element is free of income tax and the interest element will be taxed at source at 20%
   2. The benefits will all be liable to basic rate tax
   3. The benefits will all be liable to higher rate tax
   4. The capital element is free of income tax and the interest element will be taxed at source at 20%, with Betty liable to a further 20% via self-assessment

Answers

1. B – See R01 Study Text, Chp 10
   Grab our taster mock exam paper for CII R01. Click here to download.

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

3. A – See R03 Study Text, Chp 10
   Grab our taster mock exam paper for CII R03. Click here to download.

4. BCD – See R04 Study Text, Chp 6:2
   Grab our taster mock exam paper for CII R04. Click here to download.

5. D – See CF8 Study Text, Chp 5
   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!)