Friday Five – 22 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

These questions relate to examinable tax year 2015/16, examinable until 31 August 2016.

1. What does Principles Based Regulation mean?
   1. Instead of rules to cover every situation, general terms are issued to outline the types of behaviours expected
   2. The principal of each authorised firm carries the ultimate responsibility for FCA authorisation
   3. The FCA issues regulations to those responsible for controlled functions and it is their responsibility to cascade down the firm
   4. Only the main areas of compliance are supported by regulation

2. Maurice placed a life policy into trust on the 1st January 2013. He died on the 18th October 2015 and a chargeable event occurred on the life policy on the 17th May 2016. The trustees and the beneficiaries of the trust are all UK resident. Who is liable for the resulting tax on the chargeable gain?
   1. Maurice’s executors
   2. Maurice’s trustees
   3. Maurice’s beneficiaries
   4. No-one as the settlor, Maurice, is dead

3. At retirement, Bernice decides to buy a With Profit annuity. She selects an anticipated bonus rate of 5%. The same year, the provider declares a bonus rate less than this figure. What effect, if any, will this have on the level of annuity payment she receives?
   1. It will increase after 12 months.
   2. It will decrease immediately.
   3. It will decrease the following year.
   4. It will have no effect.

4. What does ‘low tracking error’ indicate?
   1. Low charges and fund administration costs
   2. The portfolio is closely following its benchmark
   3. Lower portfolio turnover
   4. The portfolio is not closely following its benchmark

5. Joanne and Tim are in the process of converting a barn into their home. In order to reclaim the VAT on materials used for the build they need to ensure it was:
   1. previously a residential property for at least 10 years
   2. built with the environment in mind using only green materials
   3. built within eighteen months of buying the materials used in the build
   4. previously a non-residential property which hadn’t been lived in for the previous 10 years

Answers

1. A – See R01 Study Text, Chp 9, Section A2
   Grab our taster mock exam paper for CII R01. Click here to download.

2. B – See R03 Study Text, Chp 10, Section H1
   Grab our taster mock exam paper for CII R03. Click here to download.

3. C – See R04 Study Text, Chp 6:1, Section C2J
   Grab our taster mock exam paper for CII R04. Click here to download.

4. B – See J12 Study Text, Chp 4, Section F2
   Grab our taster mock exam paper for CII J12. Click here to download.

5. D – See R07 Study Text, Chp 6, Section A3
   Grab our taster mock exam paper for CII R07. 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!)