Friday Five Focus on Taxation – 5 February – 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.

1. Mavis is considering investing in a single premium investment bond. As a basic rate taxpayer, she should be aware that: Tick all that apply.
   1. she can withdraw up to 5% of the original capital each year without triggering a chargeable event.
   2. she can reclaim the basic rate tax suffered by the life fund.
   3. any gain she makes in the future could potentially be liable to capital gains tax.
   4. she can assign the policy to her spouse without it causing a chargeable event.
   5. she can use top slicing on any future chargeable gain £0.

2. Andrew is a self-employed plumber and for the first time is going to complete his tax return online. He wants to know when the deadline is for submitting this to HMRC for the 2020/21 tax year. You tell him that the filing date is the:
   1. 31st October 2021.
   2. 30th December 2021.
   3. 31st January 2022.
   4. 31st January 2023.

3. Which of the following benefits is either wholly or largely exempt from income tax for an employee?
   1. Accommodation where the employee pays a low rent
   2. A company car that runs on diesel
   3. Premiums paid for Private Medical Insurance
   4. An award of £1,000 for 25 years’ service

4. Ben has recently died having run his landscape gardening business as a sole trader for 15 years. He has left the business, with a value of £500,000, to his son Charlie. Which of the following is true regarding the IHT position on Ben’s business?
   1. Agricultural relief can be claimed at 50%.
   2. Business relief can be claimed at 50%.
   3. Agricultural relief can be claimed at 100%.
   4. Business relief can be claimed at 100%.

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

2. C – See R03 Study Text, Chp 6
   Grab our taster mock exam paper for CII R03. Click here to download.

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

4. D – See R03 Study Text, Chp 4
   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.