Friday Five – 22 November – 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 2019/20, examinable until 31 August 2020.

1. How do you calculate a client’s net worth?
   1. Deduct the client’s total liabilities from their total assets
   2. Value of house less mortgage
   3. Total expenditure deducted from total income
   4. Value of non-essential expenditure

2. Charlie and Juan each have a rental property, the details of which are as follows:
    
   

   Name	Cost of Property	Purchase Costs	Rental Income	Expenses
   Charlie	£160,000	£2,300	£600 pm	£100 pm
   Juan	£130,000	£2,100	£550 pm	£90 pm

   What are the respective net rental yields for Charlie and Juan?
   1. 3.70% and 4.18%
   2. 3.75% and 4.25%
   3. 4.5% and 5.08%
   4. 4.44% and 4.50%

3. Tamsin makes a transfer of £150,000 to a discretionary trust and 4 years later made a PET of £325,000. She dies 6 ½ years later. All other gifts were covered by the annual allowance. Assuming she had used her annual exemptions elsewhere what is the Inheritance Tax liability?
   1. Nil
   2. £12,000
   3. £24,000
   4. £60,000

4. Simon, who is a director-shareholder in the business, is retiring in the tax year 2019/20 and will receive a final salary pension based on his 25 years’ service in a 1/60th scheme. The scheme’s definition of pensionable remuneration includes all of his earnings as an employee. Simon’s total remuneration consists of:
    
   

   Basic Salary	£20,000
   Commission	£10,000
   Bonuses	£4,000
   Dividends	£6,000

   Simon’s final salary pension is:
   1. £16,667
   2. £15,000
   3. £14,167
   4. £8,333

5. Caledon Ltd has an agreed overdraft facility with their bank of £50,000. They have only ever used £20,000 of it occasionally to cover short term cash flow problems. In considering the insurance cover, they should have on this, the cover should be for:
   1. £20,000
   2. The average amount used over the last 5 years
   3. £50,000
   4. An amount agreed with their bank

Answers

1. A – See R01 Study Text, Chp 8
   Grab our taster mock exam paper for CII R01. Click here to download.

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

3. B – See R03 Study Text, Chp 4
   Grab our taster mock exam paper for CII R03. Click here to download.

4. C – See R04 Study Text, Chp 2:1
   Grab our taster mock exam paper for CII R04. Click here to download.

5. C – See R05 Study Text, Chp 10.2
   Grab our taster mock exam paper for CII R05. 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?

If you found this quiz useful for your CII exam revision, please do share it with your colleagues.