Friday Five Focus on Taxation – 17 December – 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.

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. Phil doesn’t receive a tax return but made a significant gain when he sold his portfolio of shares on 7 April 2021. By what date must he tell HMRC and when must he pay any capital gains tax?
   1. By 5 April 2022 and paid within 6 months of the gain being made
   2. Within 6 months of the gain being made and paid by 5 April 2022
   3. Within 28 days of the gain being made and paid by 5 April 2022
   4. Within 6 months of the end of tax year 2021/22 and paid by 31 January 2023

3. Gemma is a higher rate taxpayer. She invested £100,000 into an onshore investment bond just over 8 years ago, which was segmented into 100 identical policies. The bond is now valued at £140,000. She would like to know how much she can withdraw from the bond with the minimum amount of tax liability. You tell her that:
   1. she can withdraw £500 from each policy without any immediate tax liability.
   2. she can withdraw £500 from each policy with a 20% tax liability on £50,000.
   3. she can surrender 50 policies with a 20% tax liability on £10,000.
   4. she can withdraw £450 from each policy without any immediate tax liability.

4. Which of the following statements regarding the annual tax charge for non-domiciled persons is true?
   1. Paying the annual tax charge on unremitted foreign income and gains allows the individual to remit other income and gains with no further liability.
   2. An individual can elect to pay tax on their worldwide income and gains for a specific tax year to avoid the annual tax charge.
   3. The annual tax charge is £30,000 for adults resident in the UK for at least 12 tax years and who claim the remittance basis.
   4. The charge does not apply to unremitted income and gains of less than £3,000 in any tax year.

5. Which of the following would be liable for CGT on their worldwide investment gains? Tick all that apply.
   1. Amy – a UK resident and UK domicile
   2. Ben – a permanent non-UK resident but UK domiciled
   3. Charles, a non-UK domicile and UK resident not using the remittance basis
   4. Edward, a non-UK domicile and UK temporary non-resident

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 3
   Grab our taster mock exam paper for CII R03. Click here to download.

3. D – See R03 Study Text, Chp 10
   Grab our taster mock exam paper for CII R03. Click here to download.

4. B – See R03 Study Text, Chp 5
   Grab our taster mock exam paper for CII R03 Click here to download.

5. ACD – See R03 Study Text, Chp 5
   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.