Friday Five Focus on Taxation – 15 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 2021/22, examinable by the CII until 31 August 2022. They do not relate to tax year 2022/23 which is only examinable by the CII from 1 September 2022.

1. As an adviser, you have been asked to explain the Capital Gains Tax (CGT) implications for the trustees of a bare trust. You explain that: Tick all that apply. 
   1. the trustees will be liable to CGT at a rate of 10%.
   2. any chargeable gains are usually treated as the beneficiary’s. 
   3. the trustees will have a standard rate band of £1,000 to offset against gains. 
   4. the beneficiary is liable for any CGT and can use their full annual exempt amount.

2. Madeline died on 12 December 2019 leaving her entire estate to her husband John.  John died on 23 November 2021. Their children are acting as personal representatives and they want to know how long they have to make a claim for the transfer of Madeline’s unused nil rate band. You tell them they have/had until: 
   1. 12 December 2021 
   2. 23 November 2023 
   3. 5 April 2023 
   4. 30 November 2023

3. Caroline’s earnings are £60,000. She pays £4,000 into a personal pension each year.  Her husband Tom no longer works. He stays at home to look after the children and claims child benefit of £1,828 a year. Which of the following statements is correct? 
   1. As Tom claims child benefit, any High Income Child Benefit tax charge will fall on him. 
   2. The couple would be financially better off not claiming Child Benefit. 
   3. The High Income Child Benefit tax charge in this scenario is £914. 
   4. The High Income Child Benefit tax charge in this scenario is £1,096.80. 

4. Natalie is a company director and is paid a flat fee of £20,000.  How is her National Insurance calculated? 
   1. By averaging her earnings over the last 3 years and applying the appropriate rates on a monthly basis 
   2. By considering her total earnings from the start of the tax year and using the annual limits 
   3. By applying the annual National Insurance limits to each fee she receives 
   4. By deferring the National Insurance calculation until the end of the tax year 

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 2021/22?
   1. £40,000 
   2. £60,000 
   3. £78,000 
   4. £80,000 

Answers

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

2. D – 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 1
   Grab our taster mock exam paper for CII R03. Click here to download.

4. B – See R03 Study Text, Chp 2
   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.