Friday Five Focus on Taxation – 17 March – 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 2022/23, examinable by the CII until 31 August 2023.

1. Jason has a holding of corporate bonds and his friend Michael has a holding of gilts. Jason wants to know how his holding differs from Michael’s. You can tell him that:
   1. only corporate bonds are exempt from CGT on any profit arising from a sale.
   2. only the interest from corporate bonds is taxable as savings income.
   3. only the interest from corporate bonds is always paid gross.
   4. only corporate bonds can be traded on the stock market.

2. The following investments into shares have recently been made:
   

   Name	Company	Dividend Received
   Toby – a basic-rate taxpayer	X	£90
   Rupert – a higher-rate taxpayer	Y	£90
   Simon – an additional-rate taxpayer	Z	£90

   Which of the following is true regarding the taxation of the dividends received?
   1. Only Toby and Rupert will benefit from the dividend allowance.
   2. Assuming Toby’s dividend allowance is already used, he will have a liability on his gross dividend of 10%.
   3. Rupert could have a tax liability of up to £35.42.
   4. Simon could have a tax liability of up to £35.42.

3. Maxine is considering whether to invest in Friendly Society policies for each of her three children and has asked you to supply some information. You tell her that: (Tick all that apply.)
   1. the maximum monthly premium is £25.
   2. premiums can only be paid monthly.
   3. the funds are free of UK tax on income and gains.
   4. she can only have one policy per family.

4. XYZ plc has made up its accounts for the 16-month period ending 31 January 2023. On what accounting periods, will CT be charged?
   1. There will be one 16-month long accounting period.
   2. There will be a twelve-month accounting period to 30 September 2022, and a four-month accounting period to 31 January 2023.
   3. There will be a four-month accounting period to 31 January 2022 and a twelve-month accounting period to 31 January 2023.
   4. There will be two accounting periods which will end on 5 April 2022 and 5 April 2023 respectively.

5. What strategies might be considered for Henry who is contemplating making lifetime gifts as part of his Inheritance Tax planning? (Tick all that apply.)
   1. Make a gift into a discretionary trust of an amount over the nil rate band.
   2. Make outright gifts and hope to survive them by 7 years.
   3. Make a gift into a bare trust as this is a potentially exempt transfer.
   4. Make a gift of his business to his wife to ensure he uses his nil rate band.

Answers

1. C – See R03 Study Text, Chp 9
   Grab our taster mock exam paper for CII R03. Click here to download.

2. D – See R03 Study Text, Chp 9
   Grab our taster mock exam paper for CII R03. Click here to download.

3. AC – 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 8
   Grab our taster mock exam paper for CII R03 Click here to download.

5. BC – See R03 Study Text, Chp 11
   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.