Our Review of the April 2017 CII AF1 Exam – The Key is in the Preparation

As the CII have now released their exam papers from April, it’s time for us to start scrutinising them – we start with AF1 Personal Tax and Trust Planning. This will be invaluable reading as you prepare for your CII AF1 exam.

If you haven’t seen it yet, then the paper can be found here:

http://www.cii.co.uk/media/7495520/af1_april_2017_qp.pdf

Question 1

This is the big 80-point question, and in order to score well, candidates needed to have a wide knowledge of different areas from the syllabus.  There were only two calculations in Question 1 which totalled just 22 of the marks; the rest was made up of explanations of technical various areas.

These calculations included inheritance tax on a discretionary trust as well as on the residual estate. Some of the details to include were a failed PET, assets which would have qualified for business relief and debts that could have been deducted.  Candidates may have missed some of these, but in fact, it was a relatively straightforward calculation, and as we all know now it is possible to still score well when errors have been made throughout the process.

The rest of the sub-questions in Question 1 tested knowledge on deeds of variation (which have been tested loads in the past), Capital Gains Tax during an administration period, trustee taxation, discounted gift trusts and (19 marks) for knowledge of powers of attorney.  All in all, Question 1 covered a wide range of knowledge, but many areas have come up before, so we feel it was a fair test of AF1 knowledge.

Question 2

The second question was, as if often the case, a much shorter read involving just two people  married to each other (unlike Question 1 which had six family members spanning four generations to make sense of!).  A standard income tax and national insurance calculation kicked the questions off; the income tax calculation involved unit trust interest (which still needed to be grossed up) and deposit interest and dividends (which don’t need grossing up).  There was a personal allowance reduction calculation within this as well, but a well prepared candidate should have had no problems with this.  The questions continued with the application of the transferable personal allowance and how one of the spouses could reduce their income tax liability.  We feel students would have picked up the majority of these marks on offer.  Question 2 finished with the criteria needed to demonstrate self-employment and VAT.

Question 3

Question 3 may have caused some hearts to sink as the wife in this scenario was Chinese with assets still held in China. The question on double tax agreements and how her assets would be treated for IHT were further into the questions and hopefully out of the 10 marks on offer, candidates would have picked up some.   There was also a 9-mark CGT calculation, which included a deferred gain from an EIS as well as buy-to-let property and a business; all of these disposals would have meant different CGT rates, so the challenge would have been to ensure they were taxed in the right order with losses deducted from the correct gain.

The question paper finished with the couple transferring assets between them and the impact of this as a married couple, as a separated couple and as a divorced couple.  This area has been tested a lot in the past, so anyone using past papers would, we are sure, have come across this.

We’ve compared this paper with the paper in October 2016, which can be found here:

http://www.cii.co.uk/media/7162788/af1_october_2016_qp.pdf

This was quite a different paper from the April paper with perhaps the only overlap being the first question, which was a big 20-mark income tax calculation which would have helped practice income tax for the April exam.

The most common mistake candidates make with this exam, is that they don’t answer the question being asked and when they do, it generally is not in enough detail.  A good tip is to read all the questions first, as often parts of a question are closely linked and it could be the answer you’ve given to (a) is actually more relevant to (b).  Unfortunately, if the answer isn’t in the right place, then the examiner cannot give the marks.  What has also been included in the exam paper itself is the reminder that answers should ‘take into account the clients circumstances as set out in the case study’.  AF exams are about the application of knowledge, so examiners are looking to see that students can demonstrate this.

Using past papers is of course a great way to prepare but not just the last one – as we saw  the paper from last October would only have helped a bit so use as many as you can get hold of to get a much broader view of the different areas that come up regularly.

AF exams are a challenge, but the subjects tested in AF1 should all be fully covered in J02 and in R03 so the key to success is in the preparation and making sure that each chapter of both manuals is fully studied and understood and plenty of practice is done beforehand with each of the main types of calculation.

Grab the resources you need!

If you’re studying for your CII AF1 exam, and you’re wanting to feel confident on exam day, you’ll need to prepare as much as possible. Grab our free taster to try out one of Brand Financial Training’s resources for yourself.  Click the link to download the AF1 calculation workbook taster now!

Over to You…

If you’re planning on sitting AF1 in the near future, on what areas will you focus your study efforts?