Friday Five Focus on Taxation – 22 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 2023/24, examinable by the CII until 31 August 2024.

1. Lynne and her husband are considering letting a room in their house. Which of the following is true regarding letting rooms in their main residence? (Tick all that apply.)
   1. Where gross rent in a year is not more than £7,500, they will not be charged to tax.
   2. Rent a room relief will not apply if the accommodation is unfurnished.
   3. Rent a room relief is automatic.
   4. Lynne and her husband can both claim rent-a-room relief of £7,500.
   5. They can let the room for business purposes and claim rent-a-room relief.

2. Madeline died on 12 December 2021 leaving her entire estate to her husband John. John died on 23 November 2023. Their children are acting as legal 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 2023.
   2. 23 November 2025.
   3. 5 April 2025.
   4. 30 November 2025.

3. One of your clients has recently been asked to be a trustee on a discretionary trust which has the bulk of its investment in equities. He is concerned about the taxation of any dividends for the trust and the beneficiaries. You tell him that the trust is
   1. liable for 39.35% Income Tax after they have exceeded their standard rate band and the beneficiary is deemed to have received trust income not dividend income.
   2. not liable for any Income Tax and the beneficiary pays an extra 22.5% if they are a higher-rate taxpayer.
   3. liable for 8.75% Income Tax with the beneficiary paying an extra amount as determined by their own tax status.
   4. liable for 39.35% Income Tax after they have exceeded their dividend allowance and the beneficiary is deemed to have received trust income not dividend income.

4. Stuart owed a balancing tax payment of £10,000 on 31st January 2024. In late March 2024, he still had not paid it. What penalty will HMRC usually charge Stuart?
   1. £250
   2. £500
   3. £750
   4. £1,000

5. Sarah is NOT registered for VAT but realises on the 1st May 2023 that sales for May will be in the region of £87,000. Which of the following is true regarding VAT registration? (Tick all that apply.)
   1. She must inform HMRC before the 30th May.
   2. Once she has informed HMRC she will be VAT registered from the 1st May.
   3. If she doesn’t notify HMRC she may be charged a penalty.
   4. Once she has informed HMRC she will be VAT registered from the 1st June.

Answers

1. ABC – 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 4
   Grab our taster mock exam paper for CII R03. Click here to download.

3. A – 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 6
   Grab our taster mock exam paper for CII R03 Click here to download.

5. ABC – See R03 Study Text, Chp 8
   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.