Friday Five Focus on Taxation – 8 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 2023/24, examinable by the CII until 31 August 2024.

1. Which of the following is most likely to be classed as a gift with reservation for IHT purposes by HMRC?
   1. Simon gives away his holiday home to his sister but continues to stay there paying full market rent.
   2. Elaine gives away her antique jewellery to her daughter but cleans it annually.
   3. Edmond gives his son his share portfolio but retains the right to dividends from it.
   4. Andrea gives her antique chairs to her brother but always sits on them when she visits.

2. Sylvia is hoping to make up a significant gap in her National Insurance contributions record by paying Class 3 contributions. Which of the following must she be aware of?
   1. She must satisfy a residence condition.
   2. They do not increase entitlement to State pension.
   3. The contributions are collected weekly by demand.
   4. She can make Class 3 contributions after she reaches State pension age.

3. Majestic plc pays a dividend of £270 each to two brothers, Jason and Miles. Jason is a higher-rate taxpayer and Miles is an additional-rate taxpayer. Which of the following is correct regarding their Income Tax liabilities?
   1. Jason will pay tax at 8.75% once he has used up his dividend allowance.
   2. As an additional-rate taxpayer Miles is not entitled to the dividend allowance.
   3. Assuming he has not used his dividend allowance, Miles has no tax to pay.
   4. Assuming he has used his dividend allowance, Jason has a liability of £87.75.

4. Mr Sloane has created six discretionary trusts over his lifetime, 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. £6,000
   2. £3,000
   3. £600
   4. £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. C – See R03 Study Text, Chp 4
   Grab our taster mock exam paper for CII R03. Click here to download.

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

3. C – See R03 Study Text, Chp 9
   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.