Friday Five – 24 May – 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 2018/19, examinable by the CII until 31 August 2019.  They do not relate to tax year 2019/20 which is only examinable by the CII from 1 September 2019.

1. What is the difference between a compulsory purchase annuity (CPA) and a purchased life annuity (PLA)?
   1. CPAs must be bought from the life office where the pension fund has accumulated.
   2. Only the income element of a PLA is taxable whereas the whole amount of CPA income is taxable.
   3. CPAs generally offer better annuity rates than PLAs.
   4. CPAs can only be purchased from pension fund proceeds and PLAs can only be purchased from tax-free lump sums.

2. Why might an investor prefer to invest in an offshore reporting fund instead of a non-reporting fund? Tick all that apply.
   1. To avoid the non-reclaimable withholding tax
   2. Because dividends are paid gross
   3. Any capital gain is subject to normal CGT rules
   4. To benefit from enhanced consumer protection

3. When would a Capital Gains Tax (CGT) chargeable disposal be deemed to have taken place in the following scenarios?
   1. Sian, a beneficiary under a trust becomes absolutely entitled to the trust assets
   2. James makes a gain of £120,000 on selling his main residence
   3. A married couple change ownership of their investment bond when one becomes a basic rate taxpayer
   4. Peter dies and his antique car is passed to his son in accordance with his wishes

4. John is self-employed and is wondering whether to purchase a buy‐to‐let property to help supplement his future retirement income. Which of the following are considerations for John? Tick all that apply.
   1. Interest on a mortgage can be offset against rental income for some tax relief.
   2. He could suffer capital gains tax on a future sale.
   3. The property will not form part of his estate for IHT purposes.
   4. The rate of stamp duty land tax is 3% above standard stamp duty rates.

5. How is the cover provided under a whole of life policy affected if premiums cease at a stated age?
   1. It remains in force for a maximum period of 10 years
   2. It reduces to 50% when premiums cease
   3. It reduces by a stated percentage in each future year
   4. It is not affected – the cover continues until death

Answers

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

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

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

4. ABD – See R04 Study Text, Chp 8
   Grab our taster mock exam paper for CII R04. Click here to download.

5. D – See R05 Study Text, Chp 4
   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.