Friday Five Focus on Taxation – 5 Questions in 5 Minutes – 14 Nov 2025

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 2025/26, examinable by the CII until 31 August 2026.

1. Adrian transferred assets worth £150,000 into a trust, in which he has no interest. If he had sold the assets, he would have made a gain of £40,000. If holdover relief was claimed, what effect would it have on the trust?
   1. Holdover relief is not available as the value of the gift is below the nil rate band.
   2. There is no Capital Gains Tax at the time of the transfer, but the acquisition cost of the trust is reduced to £110,000.
   3. Adrian has no immediate Capital Gains Tax liability, as it is deferred to the first periodic review.
   4. The trust is liable to Capital Gains Tax at acquisition and not on Adrian at disposal.

2. Hannah has started a hairdressing business with anticipated earnings for the first year of £6,500. Regarding her position in relation to National Insurance contributions it is true to say that she must
   1. apply for a certificate of exemption from class 2 contributions.
   2. advise HM Revenue & Customs that her earnings are expected to be below the small profits threshold.
   3. decide for herself whether to pay class 2 contributions assuming her profits stay below £6,845.
   4. pay the class 4 weekly flat rate contribution of £3.50.

3. Henry has recently made a transfer to a discretionary trust. What is a necessary condition for the disposal to qualify for holdover relief?
   1. Henry and the trustees must all be UK resident.
   2. The disposal must be of shares to a company.
   3. Henry needs to claim it.
   4. Inheritance Tax must have been paid on the transfer.

4. In assessing if Janine is employed or self-employed, which of the following might generally indicate that she is employed?
   1. Her work is highly skilled and she works without supervision.
   2. She would expect to be shown how to perform new tasks.
   3. Her contract is to provide services.
   4. She works with many organisations although her role is broadly similar.

5. The accounts for a public limited company have been prepared for a 16-month period ending 31 January 2026. According to HM Revenue & Customs, on what basis will Corporation Tax be charged?
   1. There will be one 16-month long accounting period.
   2. There will be a 12-month accounting period to 30 September 2025, and a 4-month accounting period to 31 January 2026.
   3. There will be a 4-month accounting period to 31 January 2025 and a 12-month accounting period to 31 January 2026.
   4. There will be 2 accounting periods which will end on 5 April 2025 and 5 April 2026 respectively.

Answers

1. B; See R03 Study Text, Chp 3; Rationale: Where holdover relief is claimed, no CGT is payable at the time of the gift, but the acquisition cost to the recipient is reduced by the amount of the held-over gain. The acquisition cost to the trust is therefore £110,000 (£150,000 – £40,000).
2. C; See R03 Study Text, Chp 2; Rationale: Where a self-employed person’s profits are below the small profits threshold of £6,845, there is no obligation to pay class 2 NICs. Hannah can do so voluntarily if she wishes.
3. C; See R03 Study Text, Chp 3; Rationale: To qualify for holdover relief regarding a trust, only the donor needs to make the claim. Only the recipient needs to be resident in the UK. It is not available for transfers of shares to a company. Transfers chargeable to IHT qualify for holdover relief, even if no IHT is actually paid (i.e., because the gift is within the available nil rate band).
4. B; See R03 Study Text, Chp 1; Rationale: The fact that Janine would expect to be shown how to perform new tasks might indicate that she is employed. The other options are all indicators of a client-contractor relationship, i.e. self-employment.
5. B; See R03 Study Text, Chp 8; Rationale: Where a company makes up a single set of accounts for a period of 16 months, there will be an initial 12-month accounting period (in this instance to 30 September 2025) followed by a four-month accounting period (to 31 January 2026). The same principle applies to other accounting periods of more than 12 months.

Grab the resources you need!

If you’ve worked through this week’s tax-focused quiz, the next step is to test your knowledge in exam conditions. Our CII R03 E-Mocks replicate the real exam format, helping you identify weak spots and build confidence before exam day. Try the free taster version to experience the platform and see how close it feels to the real thing.

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