Friday Five Focus on Taxation – 3 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 2021/22, examinable by the CII until 31 August 2022.

1. Why might Tom, a higher rate taxpayer with an adventurous attitude to risk, want to invest a lump sum in an Enterprise Investment Scheme?
   1. To have control over the investment
   2. To gain CGT exemption after a holding period of 3 years
   3. To receive dividends tax-free
   4. To receive 50% income tax relief on an investment of £200,000

2. Jamie is considering selling his business but is concerned about the potential Capital Gains Tax bill he will get if he does. You explain to him that he can claim business asset disposal relief as long as:
   1. he has owned the business for at least two years prior to selling.
   2. as shareholder, he holds at least 10% of the voting rights.
   3. he has made taxable profits in excess of £500,000 for 3 consecutive tax years.
   4. he hasn’t exceeded the lifetime limit of £5m of gains that qualify.

3. Harriet has recently joined a workplace pension scheme which has been established as a group personal pension plan. She is a higher rate taxpayer. She should be aware that: Tick all that apply.
   1. at retirement, her only income option is likely to be a scheme pension
   2. if she dies before age 75, her fund will be subject to income tax in the hands of the recipient.
   3. she may be able to carry forward unused allowance from the previous three tax years to boost her contributions.
   4. the earliest age at which she can take her benefits is currently 55.

4. Bernard made a £14,000 loss on a disposal in this tax year whereas his wife Betty made a substantial gain. Which of the following is he permitted to do?
   1. Carry the loss forward to use in future years with an adjustment for inflation
   2. Carry the loss forward to use against future gains using only enough to reduce future gains to the annual exempt amount
   3. Offset his loss against the gain Betty has made in the same tax year
   4. Offset the loss up to the annual exempt amount against Betty’s gain and carry forward the surplus to use in future years

5. What do promoters of tax avoidance schemes receive from HMRC in the event of their scheme being registered?
   1. A reference number
   2. A fixed penalty
   3. A 6-month timescale to wind up the scheme
   4. Sanctions to be used in all promotions

Answers

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

2. A – See R03 Study Text, Chp 12
   Grab our taster mock exam paper for CII R03. Click here to download.

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

5. A – 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.