The April 2016 CII AF1 Exam: The Key is in the Preparation

Looking at the questions set in April’s CII AF1 Personal Tax and Trust Planning exam has been really interesting. In this article, we review these questions and highlight areas on which to focus your revision.

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

http://www.cii.co.uk/media/6827640/af1_april_2016_qp.pdf

Question 1

Question 1 is the big 80-point question, and candidates really needed to have a wide knowledge of different areas to score well here. It had three calculations for a total of 37 marks, and with all calculation questions, plenty of marks can be picked up even if the wrong answer is ultimately arrived at.

These calculations were income tax, which included a company car with private contribution, a personal pension contribution, gift aid and different investments – one of which was held jointly. There were of course quirks to watch out for; the personal contribution towards the car was £6,000 yet the maximum deduction is £5,000. The gift aid needed to be grossed up just like the pension and used to increase the basic rate band. The joint bank account needed to be split and taxed at a different rate than the dividends. There was a lot to potentially slip up on, but even if there were small errors it is possible to still score quite well.

The rest of the questions tested knowledge on child benefit, national insurance, VCTs, bankruptcy and self-employed taxation. These were, in the main, fair questions; although, 11 marks for ‘state the ongoing requirements that the VCT must satisfy in order to continue to receive favourable tax treatment’ we do wonder about. This is a hefty list to remember and does rather beg the question why an adviser would be tested on this sort of information which most clients would not be interested in rather than the tax implications which they most definitely would be ….

All in all, question 1 was a pretty in-depth start to a 3-hour exam!

Question 2

Thankfully, Question 2 is usually much shorter and to the point; yet this time round, candidates were tested on an area we suspect filled a lot of them with dismay: the specifics and taxation of disabled trusts. There were 9 marks for explaining the conditions that need to be satisfied for a trust to qualify as a disabled person’s trust (we have struggled to come up with 9 different points here), 14 marks for the income tax treatment and another 7 for the CGT treatment – again this must have been a challenge. The rest of the marks available were made up of an IHT calculation for a transfer into a trust, how a discretionary trust could be amended to recognise a vulnerable beneficiary and the powers of the court of protection. All in all, this was a difficult question, which we feel took up too much space (ie marks) in the exam. We suspect full marks would have been scored by very few candidates with most very keen to turn the page to get to Question 3.

Question 3

This question was again nice and short and covered domicile and residency rules, quick succession relief and wills. There was a lot of detail in this question. The domicile question would not have caused too many issues although we suspect finding 6 points regarding one of the client’s residency statuses may have proved more of a challenge.

The quick succession relief calculation if practised beforehand would have caused few problems for the well prepared client and again marks could have been picked up for process even if the wrong answer was given.

Wills and intestacy laws have been tested numerous times in the past so anyone using past papers to revise from should have been fine with the 3 questions on this area. Finally there was a question on the brother of the main client. Candidates were asked to explain his IHT position should he die – no calculation was needed and it was only for 4 points. Hopefully most candidates would have picked up that Luke’s profession was a fire fighter and that for deaths after 2014 the existing IHT exemption for members of the armed forces where death is caused whilst on active service was extended to members of the emergency services.

Comparing to October’s Paper

We’ve compared this paper with the paper in October 2015, which can be found here:

http://www.cii.co.uk/media/6451907/af1_october_2015_qp.pdf

This was quite a different paper from the latest one; although, bankruptcy was tested as well as there being an income tax calculation, which might have helped with revising for April.

The most common pitfall with this exam is that candidates don’t answer the question being asked, and even if 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 mark.

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 little 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.

The Key is in the Preparation

This paper seems quite challenging. Having said the subjects are all fully covered in J02 and in R03, so like any AF exam, the key 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 pleased with your outcomes on results 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?