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The Technical Quiz: 9 October

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

Question one

What is the difference between a purchased life annuity and a compulsory purchase annuity?

A) A PLA is bought from an individual’s capital and all the income is subject to income tax as earnings. A CPA is bought by a pension fund and part of the income from it is tax-free.

B) A CPA is bought from an individual’s capital and part of the income from it is tax-free. A PLA is bought by a pension fund and all the income is subject to income tax as earnings.

C) A PLA is bought from an individual’s capital and part of the income from it is tax-free depending on age at purchase. A CPA is bought by a pension fund and all the income is subject to income tax as earnings.

D) A PLA is bought from an individual’s capital and the income is normally tax-free. A CPA is taxable but the level of gross income is generally higher than the income from a PLA.

Question two

Carter has made losses in his sole trader business as an electrician for the tax year 2014/15. How can these losses be utilised?

A) The amount of the loss may be deducted from other income of the same year, carried back to the previous tax year or carried forward to subsequent tax years.

B) The loss may be deducted from other income of the same year, and any surplus is then lost.

C) The loss may only be carried back to previous tax years.

D) The loss may only be carried forward to subsequent tax years against profits of the same trade.

Question three

James is a drug dealer who invested part of the proceeds of his criminal activities into a portfolio of investments and part into a legal garage business. What is the name given to the money-laundering method he used?

A) Placement.

B) Layering.

C) Integration.

D) Transfer and conversion.

Questions supplied by CPD Centre

Scroll down for answers

Answers

1) C

2) A

3) C

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