Friday Five Focus on Taxation – 30 July – 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 2020/21, examinable by the CII until 31 August 2021. They do not relate to tax year 2021/22 which is only examinable by the CII from 1 September 2021

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. What happens to ‘excluded property’ trusts in the event of the settlor subsequently becoming UK domiciled?
   1. The trust assets remain protected from Inheritance Tax (IHT).
   2. The trust becomes part of the settlor’s worldwide assets and is liable to IHT.
   3. The trust is subject to IHT, but relief given for the period the settlor was a non-UK domicile.
   4. If at least one of the trustees is UK resident, then the domicile status of the settlor has no effect.

3. Julie bought a ring for £1,000 over 10 years ago and has recently sold it for £8,000. What is the chargeable gain for Capital Gains Tax purposes?
   1. £8,000
   2. £7,000
   3. £3,333
   4. £2,000

4. Natalie is a company director and is paid a flat fee of £20,000. How is her National Insurance calculated?
   1. By averaging her earnings over the last 3 years and applying the appropriate rates on a monthly basis
   2. By considering her total earnings from the start of the tax year and using the annual limits
   3. By applying the annual National Insurance limits to each fee she receives
   4. By deferring the National Insurance calculation until the end of the tax year

5. Paul and Sarah, both age 38, are married with two children aged 15 and 17. What is the total amount they can pay into ISAs in 2020/21?
   1. £40,000
   2. £60,000
   3. £78,000
   4. £80,000

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 12
   Grab our taster mock exam paper for CII R03. Click here to download.

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

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

5. C – See R03 Study Text, Chp 10
   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.