Friday Five Focus on Taxation – 2 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 2022/23, examinable by the CII until 31 August 2023.

1. Geraldine died in the 2004/2005 tax year using 40% of the then standard nil rate band for IHT of £263,000. If her husband dies in this tax year, how much standard nil rate band can be applied for by his personal representatives?
   1. £325,000
   2. £430,200
   3. £482,800
   4. £520,000

2. Erica is considering Inheritance Tax (IHT) mitigation and wonders whether trusts may help with her planning. She should be aware that a transfer into: Tick all that apply.
   1. an interest in possession trust is a potentially exempt transfer.
   2. a disabled trust is a chargeable lifetime transfer.
   3. a bare trust is a potentially exempt transfer.
   4. a discretionary trust could trigger a 20% tax charge.

3. Nathan has recently invested in the following:
   

   Type	Purchase Price	Current Value
   Enterprise Investment Scheme (EIS)	£100,000	£110,000
   Seed Enterprise Investment Scheme (SEIS)	£100,000	£120,000

   From the information given you can inform Nathan that:
   1. Income Tax relief on both investments is at the same rate.
   2. investment can only be carried back with the EIS.
   3. both products invest in companies listed on the FTSE-100.
   4. only gains reinvested in the SEIS qualify for a 50% CGT exemption.

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

2. CD – See R03 Study Text, Chp 4
   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.