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Technical Quiz- Sept 20

To help you to keep up with the fundamentals of tax, retirement and financial planning, try answering these questions. Answers below.

Question 1: Patrick has purchased his first flat but is worried about capital gains tax. He asks you how long he must own and live in his property before the main residence exemption from CGT applies. You reply-

A) 5 years

B) 3 years

C) 1 year

D) There is no minimum period

Question : Which of the following are still entitled to indexation relief to reduce their taxable capital gains?

A) Bare trusts

B) Charities

C) Partnerships

D) Companies

Question 3: Which statement is correct regarding the annual capital gains tax exemption?

A) It can be carried forward one year if unused.

B) A child under 18 is entitled half the adult exemption.

C) A trust is entitled to at least one tenth of the exemption

D) Unused exemption can be transferred from one spouse to another.

Question 4: Anthony has earned income of £65,000 in the current tax year. He has also made a capital gain of £22,000. At what rate will he pay capital gains tax?

A) 18%

B) 20%

C) 28%

D) 40%

QUESTION 5: Alice owns 10,000 units in a unit trust. She is a higher rate taxpayer and her husband Tom is a non-taxpayer. She is already using her CGT annual exemption. She is considering transferring the units to Tom so that he can make the encashment. Which of the following statements is true?

A) There will be no CGT on the transfer of the units to Tom and on later disposal his gain will be calculated based on Alice’s original cost

B) When Alice transfers the units to Tom her original base cost will, in effect, be lost

C) The transfer of the units to Tom will crystallise a CGT charge on Alice

D) Pamela transferring the units to Tom, Tom then making an encashment using his annual CGT exemption and then passing the proceeds back to Alice the day after encashment is an acceptable tax planning device

Questions supplied by Technical Connection


1 D

2 D

3 C

4 C

5 A


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There are 3 comments at the moment, we would love to hear your opinion too.

  1. is question 3 correct? and why isnt it in the paper?

  2. CGT during the life of the trust
    The trustees are only entitled to half the individual annual CGT exempt amount. However, this exemption is shared equally between all trusts created by the same settlor, subject to a minimum of one fifth of the trust exemption.

  3. It is correct. Trustees have half the annual exemption (£5,300) split between the no of trusts in existence, but subject to a minimum of £1,060 per trust, which is one tenth of the (full) annual exemption (£10,600)

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