Friday Five Focus on Taxation – 13 November – 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 2020/21, examinable by the CII until 31 August 2021.

1. Hannah has just started a hairdressing business with anticipated earnings for the first year of £5,000. What is her position in relation to national insurance contributions?
   1. She must apply to NICO for a certificate of exemption from class 2 NICs.
   2. She must advise NICO that her earnings are expected to be below the small profits threshold.
   3. She must decide for herself whether to pay Class 2 contributions assuming her actual earnings stay below £6,475.
   4. She must pay the Class 4 weekly flat rate of £3.05.

2. A financial adviser has been asked to explain the potential capital gains tax (CGT) liabilities of the trustees regarding the assets of an interest in possession trust. She will explain that: Tick all that apply.
   1. for those created after the 22nd March 2006, there is generally no CGT uplift on the death of the life tenant.
   2. the trust will benefit from a standard rate band of £1,000 to offset against gains.
   3. for those created before 22nd March 2006, the trust assets are valued at the date of death of the life tenant.
   4. most gains realised by trustees are charged at the rate of 20%.

3. Miriam has worked in the same company for 15 years and has recently been asked by them to relocate to London to take up a new role. They have offered to reimburse relocation and removal expenses of £10,000. How will Miriam be taxed on this payment?
   1. £2,000 will be tax-free and £8,000 will be taxable
   2. £8,000 will be tax-free and £2,000 will be taxable
   3. £5,000 will be tax-free and £5,000 will be taxable
   4. The whole £10,000 will be tax-free

4. Bernard made a £14,000 loss on a disposal in this tax year; whereas his wife Betty made a substantial gain. Which of the following is he permitted to do?
   1. Carry the loss forward to use in future years with an adjustment for inflation
   2. Carry the loss forward to use against future gains using only enough to reduce future gains to the annual exempt amount
   3. Offset his loss against the gain Betty has made in the same tax year
   4. Offset the loss up to the annual exempt amount against Betty’s gain and carry forward the surplus to use in future years

5. Paul and Sarah, both age 38, are married with two children aged 15 and 17. What is the total amount they can pay into ISAs in 2020/21?
   1. £40,000
   2. £60,000
   3. £78,000
   4. £80,000

Answers

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

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

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

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

5. C – See R03 Study Text, Chp 10
   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.