The CII AF1 September 2023 Exam in Review

The CII has released their papers from the exam sittings that happened in September.  In this article, we look at what was tested this time round in AF1: the Personal Tax and Trust Planning paper. 

This article is correct as at 12 December 2023.

You can find the exam guide here. 

Question 1  

The first case study was regarding Sally who had died on 1 May 2023.  She had one child and two grandchildren, and her husband had died 10 years previously.

The questions covered various aspects of the CII AF1 syllabus starting with a description of the extent to which Sally’s estate would qualify for the residence nil rate band; this was for 10 marks, so candidates would have needed a good working knowledge of when the RNRB applies and why it did in the circumstances given in the case study.

Using that information, candidates had to then calculate the IHT on Sally’s estate and explain the impact of her making a lifetime gift in the tax year she had died.  This may have caused a challenge as making a deathbed transfer and the impact on the estate is not something that we think has been tested before.

A Will trust had been created on Sally’s death for her daughter, so there was a question around the taxation of any income that had been received, as well as the Capital Gains Tax (CGT) and Inheritance Tax (IHT) position of the trust.

The daughter had been recently diagnosed with early-onset dementia, so there was a question about how she could be removed as a trustee due to this diagnosis.

Within this first question was also a residency question for one of the grandchildren.  Residency or domicile seems to appear in each exam, so any future candidate should always make sure this part of the syllabus is fully covered in their revision schedule.

Overall, Question 1 covered a good spread of technical knowledge with most areas tested in previous exam sittings.

Question 2 

The next case study involved a married couple, Jitesh and Sita, who had three young children.

The first question was an Income Tax calculation which involved a high salary, a benefit in kind, a gross pension contribution, and also a High Income Child Benefit Charge.

In part (b), candidates were asked to work out the employer’s National Insurance contributions, and in (c), there was a small-mark question that asked when employers have to pay Income Tax and NICs to HMRC.  This may have been a difficult question as it is not a mainstream topic that is overly tested.

In (d), an annual allowance calculation was required for pension purposes which should have been well answered by most candidates.

The case study stated that the couple had an adventurous attitude to risk, and the next question tested the qualifying conditions for Seed Enterprise Investment Schemes.  The criteria for SEISs had recently changed, which should have reminded candidates to keep up to date with recent product and tax changes as they often creep into the AF1 exam.

The final question was the factors that should be considered before advising the couple on investments for their children.

Question 3 

The final case study introduced us to Marc and Caitlin who had married in the summer of 2023.  The case study gave various snippets of information, such as the fact that Caitlin owned the flat they lived in and that 20% of it was available to let.

The questions started with the eligibility rules needed to use the Rent a Room Scheme as well as the Income tax benefits of using it and then the impact on the tax payable should they have owned the flat as joint tenants.

The next question was a calculation of the CGT tax payable if Caitlin had sold the flat in September 2023.  The question was for 13 marks, and for this level of marks, candidates had to think beyond the usual calculation and consider areas such as principal private residence relief as well as lettings relief, now only available as Caitlin lived with the tenants.

The exam finished with a question on Wills – firstly, the impact of their marriage on Marc’s existing Will and the requirements for a Will to be legally valid. This is such a common area to appear in AF1 exams that this should have scored high marks for those candidates who had studied well.

Overall, the September exam seemed fair, covering many of the expected areas such as a calculation of the main taxes as well as plenty of varied theory questions.  Any future candidate must, as part of their revision schedule, ensure they study as many past exam guides as possible to become familiar with the format of questions as well as their model answers.  It is also important that at this level, candidates are using the information given in the case study to answer the questions.

Comparison with the February 2023 Exam Paper 

Let’s look at what was tested in February 2023’s paper. This exam guide can be found here.  

The topics covered were:

• Income tax calculation in the tax year of death and on an estate
• Executor’s responsibilities for reporting and payment of Income Tax
• Additional permitted subscription for ISAs
• Income Tax treatment of SIPP death benefits
• Registration of trusts
• IHT payable on creation of a discretionary trust
• CGT within a trust
• The transferable nil rate band
• Deeds of variation
• Powers of attorney
• Business asset disposal relief theory
• CGT calculation
• Residency rules

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