Friday Five Focus on Taxation – 23 September – 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. When would a Capital Gains Tax (CGT) chargeable disposal be deemed to have taken place in the following scenarios?
   1. Sian, a beneficiary under a trust, becomes absolutely entitled to the trust assets.
   2. James makes a gain of £120,000 on selling his main residence.
   3. A married couple changes ownership of their investment bond when one becomes a basic rate taxpayer.
   4. Peter dies and his antique car is passed to his son in accordance with his wishes.

2. Elaine is a basic rate taxpayer. She is also a beneficiary under a discretionary trust and has received net income of £1,650. Which of the following is correct regarding this income?
   1. Elaine is deemed to have received gross income of £3,000.
   2. The settlor of the trust will reclaim any tax on Elaine’s behalf.
   3. She has no further liability, but neither can she reclaim any tax.
   4. She will have a further liability less the amount taxed at source.

3. Under the identification rules used for calculating CGT on shares of the same type and class acquired at different times, how are shares grouped? Tick all that apply.
   1. Acquisitions within the following 90 days.
   2. Acquisitions on the same day.
   3. Acquisitions arising from a rights issue.
   4. Acquisitions in the share pool.

4. Mr Sloane has created six trusts, one of which has made a gain of £10,000 on the sale of an investment. What is the annual exempt amount for Capital Gains Tax that can be used against this gain?
   1. £12,300
   2. £6,150
   3. £1,230
   4. £1,000

5. Simon is a higher rate taxpayer. Four years ago, he invested in an Enterprise Investment Scheme and received Income Tax relief on his investment at that time. He now wishes to sell the shares. Which of the following is correct regarding his most likely Capital Gains Tax (CGT) position?
   1. If the Income Tax relief was not withdrawn, he will pay CGT at 10%.
   2. He received Income Tax relief so will pay CGT at 20%
   3. He has held the shares for over 3 years so will not suffer CGT.
   4. He will be exempt from CGT on 50% of gains and will pay 20% on the balance.

Answers

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

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

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

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

5. C – See R03 Study Text, Chp 12
   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.