Friday Five Focus on Taxation – 12 July – 5 Questions in 5 Minutes

Friday Five Focus on Taxation – 5 Questions in 5 Minutes Every Friday

What’s this all about?

Each week, we ask questions relating to one of these topics: Investments, Taxation, Pensions, Protection, or Regulation. This week, our Friday Five is relevant to Taxation; this is useful as you prepare for the CII’s R03 or AF1 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 2023/24, examinable by the CII until 31 August 2024. They do not relate to tax year 2024/25 which is only examinable by the CII from 1 September 2024.

1. Sam is self-employed and in his VAT return has reported output VAT of £10,000 and input VAT of £6,000. How much VAT will Sam either owe HM Revenue & Customs or be able to re-claim?
   1. He will owe £1,000.
   2. He will owe £800.
   3. He can reclaim £1,000.
   4. He can reclaim £800.

2. Dominic sold his house to an interest in possession trust, with the purchase price outstanding. He then set up a separate trust for his children into which he placed the debt and continued to live in the house. What is the most likely charge that Dominic will face from HM Revenue & Customs?
   1. Income Tax under the pre-owned assets tax (POAT).
   2. Capital Gains Tax under chargeable event legislation.
   3. Stamp Duty Land Tax on a reduced valuation of the debt.
   4. Income Tax under the gift with reservation rules.

3. Kevin is fast approaching retirement age. His pension pot is currently valued at £500,000. He has decided he would like to take the maximum pension commencement lump sum available and then draw down £25,000 pension income. This would be in addition to his part-time annual earnings of £27,500 and dividend income of £4,500. What would his total Income Tax liability be in 2023/24?
   1. £8,738.25
   2. £9,569.50
   3. £9,613.25
   4. £10,288.25

4. David transferred ownership of his share portfolio to his son realising a gain on which he paid Capital Gains Tax (CGT). Four years later David died, what tax, if any, is now due?
   1. His son faces a potential CGT charge on the difference between the value at which he acquired the asset and the market value at David’s death.
   2. As a failed Potentially Exempt Transfer, there could be an Inheritance Tax charge with no credit given for the CGT paid on the earlier transfer.
   3. There would be no further charge due to the CGT paid on the earlier transfer.
   4. There may be an Inheritance Tax charge, but relief would be given for the CGT paid.

5. Cleo, a first-time buyer, buys a flat in England on 1 December 2023 for £252,950. How much Stamp Duty Land Tax (SDLT) will be payable on this purchase?
   1. Nil
   2. £59.00
   3. £147.50
   4. £2,559.00

Answers

1. B – See R03 Study Text, Chp 8
   Grab our taster mock exam paper for CII R03. Click here to download.

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

3. C – See R03 Study Text, Chp 12
   Grab our taster mock exam paper for CII R03. Click here to download.

4. B – See R03 Study Text, Chp 12
   Grab our taster mock exam paper for CII R03 Click here to download.

5. A – See R03 Study Text, Chp 7
   Grab our taster mock exam paper for CII R03. 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.