Posted by Catriona Standingford on April 10, 2018 in Newsletter
10 April 2018
I hope you had a great Easter. I’m writing this while on holiday with my 2 youngest children and husband at Bluestone in Wales. There are so many activities for the kids that I can still get some work done at this very busy exam time. My eldest is lucky enough to be on holiday in Thailand with his dad – an upside to having parents who aren’t together is that you have double the number of awesome holidays! This is also helped by having family scattered across the globe.
Anyway, it’s a big week for many of you who are sitting R06, AF and J exams next week. Don’t forget that you can download our resources 24/7 so there’s still plenty of time to get help with your studies. Good luck! Don’t forget to let us know how you get on.
Catriona and the Team Brand Financial Training
How to Calculate IHT on Relevant Property Trusts
A customer requested that we discuss relevant property trusts and the type of question that could come up in an exam. This will be of interest to those revising for the CII AF1 exam.
Firstly, let’s be clear that ‘relevant property trusts’ are discretionary trusts and most lifetime trusts created on or after 22 March 2006.
A common question that comes up in the Advanced Financial Planning exam on tax and trusts (AF1) is the IHT on relevant property trusts. An AF1 student will be expected to know how to calculate the IHT, whereas an R03 student will generally just be expected to know the theory.
When the trust is created, this is classed as a chargeable lifetime transfer and if the settlement is over the nil rate band (or the cumulative amount is), 20% tax is payable upfront by the trustees. (If the settlor pays, you can use 25% which is 20% grossed up by 20%). If the settlor dies within 7 years, there may be further tax to pay; although, taper relief will be available after 3 years to reduce it.
A Typical AF1 Exam Question
Exit charges and periodic charges may also apply. Let’s look at a typical AF1 exam question.
‘A discretionary trust is set up 10 years ago. The initial value of the trust was £200,000 and the value 10 years later is £400,000. Calculate the periodic charge’.
We are told that the value at the 10th year is £400,000. From this value, we can deduct the nil rate band of £325,000. This leaves us with £75,000. The periodic charge is calculated as 30% of 20% (20% is the lifetime rate) or 6%. £75,000 x 6% = £4,500. The effective rate of tax is calculated by dividing £4,500 by the value of the trust £4,500/£400,000 x 100. This works out as 1.125%.
If one year later (11 years after the trust is created) we assume that the trustees give one of the beneficiaries a capital sum of £80,000, this will trigger an exit charge. The exit charge is calculated as a percentage of the value of that capital distribution.
Brought to you in association with Lysette Offley at Genius Material
The Right Way to Use Highlighters
Who likes to use highlighters to identify themes in their textbooks? You? Are you sure it’s a good idea? Here, we show you how using your highlighter with wild abandon can reduce the effectiveness of your exam revision, plus we share with you the right way to use highlighters.
I frequently come across students with psychedelic textbooks! Undeniably beautiful, is enthusiastically and copiously highlighting your book actually serving you?
First of all, how many different colours are you using?
If you are identifying three, four or five themes, you can probably keep on top of your colour coding. But I suspect more than that, and half the time you lose track of which colour represents which theme!
It’s all too easy to get into a muddle.
Secondly, what are you planning to do with your coding once you’ve identified the themes?
Often people whip their felt pens out because it’s easier than doing real work!
Revising is hard. Your brain will feel tired if you’re doing it properly.
Your unconscious mind, which is there to make sense of the world and keep you safe and comfortable, will try to convince you that highlighting your textbook constitutes ‘revising’, because it’s oh so much easier than the real thing!
And so, it will contrive to make you feel good and avoid getting on with it!
But get on with it, you must, if you need to get the information into your head and keep it there for the exam and beyond.
...“Brand’s Fact Find Analysis for AF5 was instrumental in my obtaining a pass. Furthermore, I found the friendly and engaging approach of Catriona evidenced a genuine interest in my successfully navigating this level 6 paper.”...
Marius Hampden, Consultant, Hopwood Ash Financial Planning, Newbury
Passing AF5 or R06 isn’t only about having the necessary knowledge and understanding, it’s about being able to apply that knowledge exactly as needed and in a timely manner.
It is essential that you have fully prepared for the exam and are ready to answer questions relating to the fact-find/case studies. If you go into the exam unprepared, you will lose vital time and marks. Our full analysis covers the areas that you are likely to see in the exam. However other questions may be asked, and we strongly advise you to think around other potential areas of questioning.
At least 10 calendar days before the exam sittings for R06 and AF5, we email in PDF format, a full detailed analysis of the fact-find/case studies issued by the CII for the next exam sitting plus types of questions and examiner’s comments, exam technique and past paper analysis, AND it includes access to email support for 1 working day before the exam (9am-5pm). The AF5 fact-find analysis also covers potential objectives and likely questions based on assumed objectives.
There's still time, before next week's exams, to get access to our analysis plus email support!
Why not try before you buy? Download one of our free tasters:
...“Your R06 case study analysis was great & definitely helped significantly – it was good to know that you are revising the right areas & hi-lighted some areas which I hadn’t anticipated – it covered the vast majority of the questions … I have used your resources on RO1, RO2,RO3, RO4,RO5 & RO6 & passed them all first time so would recommend them to anybody taking these exams.”...
Jonathan Woodman, Boroughbridge
Updates to CII Study Texts
Are you aware that the CII update their study texts throughout the examinable year to either incorporate new legislations, correct errors or clarify information? Many candidates aren't aware of this, which can result in candidates studying out-of-date information. To make this easier for you, we have collated the most recent CII study text updates.
There’s such a variety of information on offer to help you as you tackle your CII exams, that you won’t want to miss a single post. We’ve made it easy for you; just click the button below and enter your email details. Be ‘in the know’ with CII-exam-related tips and info – straight to your inbox!
Quote of the Month
..." Successful and unsuccessful people do not vary greatly in their abilities. They vary in their desires to reach their potential. "...
"5 Questions in 5 Minutes Every Friday"
This is a bit of Friday Fun where we provide you with 5 questions (and answers) relevant to a mix of CII exams. The challenge is for you to answer the questions in 5 minutes.
Where do I find the Friday Five?
We post each week's Friday Five to our blog first thing every Friday. You can either visit our blog every Friday at https://brandft.co.uk/blog/ or you can simply go there now, and click on the subscribe button in the top right-hand corner of the blog and sign up to receive notifications of our Friday Five posts.
Note that we don't email the Friday Five out to everybody every Friday, so we recommend you sign up to our blog at https://brandft.co.uk/blog/ so that you receive an email notification when it is posted. It will only take you a minute to sign up.
A bit of Friday Fun, but with the added benefit of testing your exam knowledge!