Unit 1 Flashcards
How does a Mutual organisation differ from a Proprietary one?
MUTUAL ORGANISATIONS HAVE NO SHAREHOLDERS BUT ARE OWNED BY THEIR MEMBERS
Who issues UK Banknotes?
THE BANK OF ENGLAND
What are the 4 main elements of Financial Intermediation as practised by Banks and Building Societies?
- GEOGRAPHIC LOCATION
- AGGREGATION
- MATURITY TRANSFORMATIONS
- RISK TRANSFORMATION
What is the effect of European Union Directives on UK law?
The objectives of the directive must be implemented in each state. Within a specified timescale, typically 2 years. The choice of how they are implemented if left to national authorities of each state
Which of the following are not subject to Income Tax?
A) Income from a Trust
B) A waiter’s tip
C) Educational Scholarships
C) Educational Scholarships
What classes of National Insurance contributions are paid by self-employed persons?
2 & 4
What rate of IHT is payable immediately on chargeable lifetime transfers?
20%
How much stamp duty land tax is payable by a woman who sells her house for £400,000?
None - Stamp land tax is paid by purchaser
It is possible to influence a nations level of economic activity by manipulating the amount of tax revenue and the amount of spending by the government, local authorities and public bodies. What is the name of this Economic Policy?
Fiscal Policy
What is the maximum term for which Maternity Allowance can be paid?
39 weeks
What is the minimum period per week that must be spent as a carer before Carer’s allowance can be claimed?
35 hours
Karen was born in the U.S. while her English Mother was working there on a 2 year assignment. Her father was American but never married her mother and she returned to England with her mother. What is Karen’s Domicile?
UK domicile as parents were not married and Mother’s Domiciles is UK
To what extent can deposit accounts said to be
“Secure”?
Apart from the risk of a Bank or Building Society failing, the capital is secure
What rate of tax is normally deducted at source from
Building Society accounts?
20%
Give two reasons why Offshore Investments may be more risky than similar on-shore ones
- Subject to currency fluctuations
- Local regulatory regime may not be as strong as the FCA in the UK
What is the minimum age at which a person can take out a National Savings and Investments Direct Saver?
16
What is the difference between the taxation of interest on government stocks and of that on local authorities?
Interest on GS is paid gross (but is taxable) LA stocks are paid net of 20% tax
What does the Price/Earnings (P/E) ratio of a share
indicate?
Relates the share price to the earnings (net profits) per share. Profits are not always distributed as Dividends
How can a company raise additional finance for expansion without borrowing?
By a Rights Issue of new shares to existing Shareholders
What is the normal distinction between Debentures and other loan stocks?
Debentures are normally secured on company assets
What change of attitude by lenders led to the establishment of the Buy-to-Let market?
Lenders saw Buy-to-Let business as residential rather than commercial = Different underwriting principles = lower interest rates
What type of tenancy agreement would normally be used for a Buy-to-Let property?
Assured Short-hold tenancy
What are the main advantages of an Investor of collective Investments?
- Skilled investment manager
- Reduction of risk by spreading fund
- Reduced dealing cost
- Wide choice of investment funds
Who owns and controls a unit trust fund’s assets?
The trustees
How would you define “Forward Pricing?”
Clients buy or sell units in a given dealing period at the prices that will be determined at the end of the dealing period
How does “gearing” benefit investment trusts?
A company’s gearing relates to the amount of borrowing it has taken on. Investment trusts, being companies, are able to borrow in order to take advantage of investment opportunities.
Micheal, aged 35, invests £5,940 in an ISA in May 2014 and then withdraws £1,000 in September 2014. How much can he invest in a NISA in Dec 2014?
Up to £5940 (cash) and £11,880 (equity) can be invested up to 30 June with the balance topped up to £15,000 after 1st July
In what circumstances might a terminal bonus be added to a with-profits endowment policy?
On Maturity or on early death of the life assured. Terminal bonuses are not usually added to surrender values
What rate of tax would be payable on the proceeds of a non-qualifying life policy?
Higher rate taxpayers = 20%
For others no tax due.
How much can parents invest in a Child Trust Fund?
Up to £4,000 a year
In what circumstances might a gift inter vivos term assurance be used?
To cover the possible IHT on a gift if the donor dies within 7 years
How does the deferred period on an IPI policy affect the premium?
The deferred period is the length of time before benefits commence. The longer the deferred period, the lower the premium
Which of the following would not normally be excluded from a private medical insurance claim?
- Dental Treatment
- Chiropody
- Outpatient consultation
Outpatient Consultation
What is the definition of “Indemnity”?
In the event of a claim after loss, insured persons should be restored to the same financial position they were in immediately before the loss occurred.
Which of the following would not normally be covered against damage under a buildings insurance policy?
- Garden Shed
- Fitted Wardrobe
- Dining Room Table
Dining room table
What is a “Mortgagee”?
A lender of mortgages
Whose responsibility is it to ensure that an interest-only mortgage is repaid at the end of the term?
The borrower, although the lender is obligated to ensure the borrower’s repayment method is credible and contacts the borrower at least once during the term.
A self-employed Plummer aged 30 takes out a pension mortgage. What is the minimum term for which the mortgage could run?
25 years - because minimum age they can take their cash lump sum on pension plan is 55
What is a “cap and collar” mortgage?
Interest rate cannot rise above a certain rate nor drop below a specified rate
Why do mortgage lenders insist that properties on which they lend should continuously be insured?
If property is damaged the value of the lender’s security is reduced
What is the most common form of “revolving credit”?
Credit cards
What is the max contribution to a stakeholder pension in 2014/15
100% of UK earnings overall limit of £40,000 in 2014/15
What is likely to be the main financial priority of a couple with a young family?
Family protection. Protection of income and assets against the effects of the death or illness or the Breadwinner
What is the main objective of completing a fact find?
To define the Client’s needs accurately
List the employment details of a client that an adviser would normally need to ascertain
-Employed/Un-employed/Self-Employed/Retired/Part-time/Full-time/Permanent/Temporary
- Details of employer: Nature of work/income(basic, overtime, bonuses, commission) benefits, pension
scheme
What details should an adviser request in relation to
loans?
Lender / Purpose of loan / Balance outstanding / remaining term / Secured or Unsecured / Interest rate / Repayment method / Repayment amounts
What risks might apply to investment in a bank or building society deposit account?
- Risk or loss due to collapse (small risk)
- Risk that interest rates fall to less than expected
- Risk of fall in capital value due to inflation
List the factors that an adviser might take into account when deciding on an appropriate solution/product for a client
- State provision / Client’s existing arrangements / Client’s and product’s tax position / Client’s risk profile / Timescale of needs / Flexibility required
The first stage in handling an objection should be to:
- Qualify it
- Agree with it
- Quantify it
Qualify it
What is proactive servicing?
Instigating action by contacting the client to discuss their continuing needs
Why should the life of a dependant spouse be covered by life assurance?
Their death can lead to problems in the family with young children. Could make the widower give up work to look after children or pay for Child care
What main factors affect the calculation of the level of sickness cover needed by a working parent with
children?
- Extent of any sickness benefit from an employer
- The nature and amount available state benefits
- The number and ages of the children
- Availability of any family help with domestic tasks
What is the purpose of a key person insurance?
To mitigate the loss of a company’s profits caused by the death or long-term illness of an important member of
staff
What does the cross-option method differ from the buy and sell method of partnership protection?
It comprises an option to purchase the deceased partner’s share rather than a binding contract, the deceased’s family or heirs are deemed to receive business assets rather than cash, so business relief from IHT can by claimed.
What is the most common reason for remortgaging?
To get a loan with a lower interest rate
What is the relationship between risk and reward?
Greater risk for a greater reward
If the rate of inflation is 2.5% what yield must an investor obtain on their deposit account in order to achieve a real return of 3%?
- 0.5%
- 2.5%
- 5.5%
5.5%
In what sense could a company be described as a “legal person?”
A company is a “legal person” in that it has a separate legal existence and can enter into contracts. The contract is not with the directors but with the company
Harry died without leaving a will. His estate will be distributed by:
- An administrator
- A solicitor
- A probate officer
An administrator
Which of the following statements about a will is correct?
- An executor cannot be a beneficiary
- A beneficiary cannot be a witness
- A witness cannot be a beneficiary
A beneficiary cannot be a witness
Marian was married but had no children although her parents were still alive. She died without leaving a will. If her estate was £600,000 how much will her husband inherit?
£525,000 (ie £450,000 plus half the balance)
What is “consideration” in relation to a contract?
It is the payment, or promise to pay, for the goods or services that are the basis of a contract
Can a contract be made verbally?
Yes, but contracts for sale of land must be in writing
In agency law, what is “Ratification”?
Process by which the principal formally agrees to stand by a contract made by their agent, even though the agent has exceeded the authority granted by the principle
Why do mortgage lenders insist that joint mortgages are always on a joint tenancy basis?
If one borrower defaults the lender will wish to be able to obtain full amount from the remaining borrower
What consent is required before an enduring power of attorney can be revoked?
- The donee
- The donor
- The Court of Protection
The Court of Protection
What is the moral period for which a bankruptcy order remains in force?
12 months
Jon has notes which are accepted as Legal Tender. This is because they have the backing of what?
Backing of the government and the central bank
Up to what % of their liabilities may building societies raise funds on the wholesale market?
50%
What means have large institutions in financial service markets PREDOMINANTLY used to achieve growth and diversification in recent years?
Mergers and Takeovers
Under what circumstances can a nation state opt out of a regulation laid down by the European Council and Council of Ministers?
Only if a specific dispensation has been granted.
Why are bank deposit accounts not generally considered to be the most suitable areas for long term investments?
Over longer timescales they offer less returns than asset-backed investments
Gilt-Edged securities are considered to be safe investments because they:
are British Government securities and the Government will not default on interest or capital repayments
A new gilt issue has been referred to as medium-dated. However the UK Debt Management Office has described it as short-dated. It will therefore be for how long?
Six years
If a company distributes 25% of its profits as dividends to shareholders, what is the dividend cover?
4
A public limited company wishes to raise additional finance by issuing more shares. Therefore they are obliged to?
Make a rights issue
Why could UK equities be considered an inappropriate source of income for non-taxpayers?
Tax credit on dividends paid cannot be reclaimed
A key difference between a debenture and a loan stock issued by a company is that a Debenture..
Is secured on the assets of the company
Richard intends to invest in a money market deposit account. This is most likely to suggest that he?
Has a large amount to invest temporarily
An investment trust is best described as a?
Company that invests in shares of other companies
David has been particularly attracted to investment trusts because of their ability to benefit from gearing. This indicates that David believes the market will..?
Rise
On a with-profits policy, what is a revisionary bonus?
A payment which is declared regularly and once attaching to the policy, cannot be removed
A key difference between a warrant and a call option is that a warrant:
Is generally issued by companies to give the warrant holder the right to purchase that companies’ ordinary shares
Clive, aged 27, starts a stakeholder pension plan in JAN 2008 for the minimum term, which he intended to use to repay the capital under his interest-only mortgage. His stated occupation is office manager. This minimum term of the mortgage will be?
28 years (27+28 = 55)
What is the main advantage of a capped interest rate when taking out a Mortgage?
If interest rates go up, the mortgage is interest rate is limited to a pre-set ceiling
Sue earns 30k per annum. She currently has no pension arrangements. What is the maximum gross amount she could pay into her pension and receive tax relief?
30k
A mortgage protection policy is a type of what term
policy?
Decreasing term policy
The risk of investment fluctuations can be reduced by which feature of the investment process?
Diversification
What is the correct name for a mortgage scheme that allows overpayments, underpayments, and payment holidays?
Flexible Mortgage
In relation to Stakeholder and Personal pensions, the open market option (OMO) enables the plan holder to?
Move the accumulated fund, at retirement to the life office which will provide the highest benefits
Dave has an investment bond issued by a life office, invested in their managed fund. At what rate is the provider’s underlying fund taxed?
20%
Brian is reviewing a range of investment products for his Client Claire. Which of the following is he least likely to take into account when selecting a solution;
- Claire wishes to access her investments in 5 years to buy into time-share in Portugal
- Claire’s existing investment portfolio
- The fact she has recently moved into a higher tax-bracket
- The possibility of Claire getting married and having children in the future
The possibility of Claire getting married and having children in the future
What is the advantage of explaining the benefits when making a product presentation to a Client?
It will help the Client to better understand how this product will meet his needs
Which of the following financial needs usually become a priority of becoming a parent?
- Investment
- Pensions
- Protection
- Savings
Protection
Which of these represent a ‘hard fact’ in the respect of a Client, Alice;
- Her investment portfolio performance has been below her expectation
- She plans to retire when she is 60
- Her savings account balance has fallen to £5,000
- She wishes to be finically secure when she retires
Her savings balance has fallen to £5,000
Martin has set up a trust fund for his 3 grandchildren and has appointed 2 trustees with discretion to exercise their powers. What must both trustees do before exercising their power?
Both trustees must agree before exercising their power
Having been named an executor under a will, Stella now has the legal authority to act because?
Probate has been granted
Any loss made by a partnership is usually?
The responsibility of the partners
Under the law of agency, recently an agent has been subject to Ratification. This implies that the Agent has..
Previously exceeded his authority
Walter and Winnie own their property on a Joint-tenancy basis. If Walter dies the house will?
His share of the property will automatically be passed to Winnie
The difference between a lasting power of an attorney and an ordinary power of attorney is that?
An ordinary power of attorney becomes invalid if the donor becomes mentally incapable whereas a lasting power of attorney remains effective
If James if declared bankrupt, under normal circumstances, how long will his bankruptcy order remain in place?
1 year
Up to how many days in a tax year must a person be present in the UK to be deemed a UK tax resident?
183 days in a tax year
Harry has receive a cheque for £300 in respect of share dividends. What is the gross amount of which this payment was made?
£333.33
Jake has been advised that his redundancy payment will defiantly suffer a tax liability because?
He got paid out more than £30k therefore is susceptible to tax
Which of the following assets would be exempt from CGT?
- Personal jewellery valued at £20k
- A spanish property used for holiday visits
- Euros held for use on foreign holidays
- Shares purchased on the UK stock market
Euros held for the use on foreign holidays
Which of the following in NOT exempt from CGT?
- Authorised unit trusts
- Gilts
- NS&I guaranteed growth bonds
- Stocks and shares ISA
Authorised Unit Trusts
In calculation of CGT liability, what are allowable deductions?
Costs incurred for acquiring, enhancing and disposing of an asset
When shares are purchased using a telephone share dealing service what will the buyer pay upfront?
Stamp duty reserve tax based on market value (0.5%)
The profits of a sole trader are subject to which classes of National Insurance contributions?
2 & 4
Mandy is pregnant with her first baby. She has been a full-time, self-employed Graphic designer since leaving university. What benefits may Mandy be able to claim before her baby is born?
Maternity allowance
When a chargeable lifetime transfer is made, what rate of tax applies immediately?
20%
For an investment to grow in real terms it must increase at a greater rate than?
Inflation
Which type of fee in normally charged on a fixed rate mortgage but not on a standard variable rate mortgage?
Arrangement fee
What is the advantage to a variable rate mortgage?
Borrowers are able to benefit from reductions in interest rates
What is a Disintermediation?
The process by which Borrowers and Lenders interact directly rather than through an intermediary
What does it mean for a Building Society to Demutualise?
To convert to a bank
What is carpetbagging?
Opening an account at a building society that is soon believed to convert to obtain shares
What is UK retail ring-fencing?
Separates retail banking operations from investment/wholesale banking
How much return do you typically get on a dividend in a Credit Union share?
2-3%
How much must a Credit Union have in reserve?
£500,000 or 5% of total assets. Whichever is greater
What is the interbank market?
Recycles surplus cash of banks to other banks or through services of specialist money brokers
What is the London interbank offered rate (LIBOR)?
The rate of interest charged in the interbank market
What % are banks required to hold in capital of their Risk-weighted assets? (RWAs)
10% and a further 7-10% in the form of primary loss-absorbing capital
What is the Clearing process?
The process of settling between banks the transfers of money outstanding. Happens at the end of each business day
Who co-ordinates Clearing services in the UK?
UK payments Administration LTD
Who are the 3 operational clearing companies?
- The cheque and credit clearing company
- The bankers automated clearing service
- The clearing house automated payment system
How many tiers is the Regulation of the Financial service industry in the UK?
5 tier
How do you acquire a domicile of origin?
When you’re born you take on your the same domicile as your father or your mother if they are not married
How much in £ would redundancy have to exceed to be liable for tax?
£30,000
The PRA have confirmed that a bank with core deposits in excess of how many billions will require to ring fence their operations?
25 Billion
Who are BACs, CHAPs and the cheque and clearing company regulated by?
Payment Systems Regulator
What is the Single Supervisory Mechanism? (SSM)
Is the name for the mechanism that sees the European Central Bank hold responsibility for the supervision and monitoring of banks in EU member states.
From April 2016, how much savings interest will be tax free?
£1000 normal basic rate tax payers
£500 higher rate
£0 additional
In 2015/16 how much is the new personal allowance for those born after or on 6th April 1938?
£10,600
£10,660 for those born before
How much personal allowance is transferable to their spouse?
10% £1,060
How much is the blind persons allowance?
£2,290
Taxation
£0 - £5000 = 0%
£5000 - £31,786 = 20%
£31,786 - £150,000 = 40%
£150,000+ = 45%
Taxation
£0 - £5000 = 0%
£5000 - £31,786 = 20%
£31,786 - £150,000 = 40%
£150,000+ = 45%
A married man aged 30 receives £22,600 gross building society interest and no other income. What is his tax due?
Personal allowance £10,600 = £12,000 £5000 at 0% = £7000 20% of £7000 = £1,400
At what usual rate is national insurance paid?
12%
How much CGT Allowance do individuals get per year 2015/16?
£11,100
Up to what can parents earn to claim Child tax credit?
£26,000
Financial Intermediaries can provide maturity transformation because they?
Match a wide range of short-term deposit accounts from a large number of clients
What is the a function of the BoE?
Banker to the government
The main reason the BoE transferred responsibility for the management of new issues of gilt edged securities to the debt management office was to?
Avoid conflicts of interest
Jenny has had an element of her husband John’s income tax allowance transferred to her. This must mean that?
John is registered as blind
Jon has invested in short-dated gilts. What is their maximum term to redemption?
7 years
Jim is a higher rate taxpayer who has investments in gilt-edged securities that pay £10,000 p a. How much tax, if any, will be deducted at source from the payment made to him?
None - interest is paid gross
If Helen invests in shares which are quoted in the Alternative investment Market her shares are likely to be from which sort of company?
A new, small company with growth potential
A company is paying a dividend cover of 0.95. What does this indicate?
Will be paid out of retained surpluses
Which of the following is not regarded as a commodity investment?
- Commercial property
- Electricity
- Gold
- Work of Art
Commercial property
Interest on gilts is paid without deduction of income tax but is taxable. True or False?
True
Returns from which of the following NS&I products are tax-free?
- Guaranteed growth bonds
- Guaranteed Income bonds
- Income bonds
- National savings certificates
National savings certificates
The primary reason why an investor would consider using a short term investment in a foreign currency is connected with?
The overall level of return
Can a manager of an investment fund borrow to potentially improve capital and growth?
Yes
Micheal requires a life policy to pay out a guaranteed fixed cash value at maturity and needs the level of life cover and premiums to remain fixed throughout the term. Which of the following types of policy would be most suitable?
- Low cost with profits endowment assurance
- Non profit endowment assurance
- Unit linked endowment assurance
- Universal whole of life assurance
Non profit endowment assurance
Under the terms of a traditional split-capital investment trust, what minimum % of the income generated by the portfolio is allocated to the income shares?
100%
Chris has entered into a forward contract for the purchase of a commodity. This means that?
He has an obligation to buy the commodity at the agreed time and place
Which of the following is a feature of a repayment mortgage?
- Repayments will be unchanged throughout the term of the mortgage
- The borrower will have to take out an investment policy to cover the shortfall at the end of the mortgage
- The capital amount does not reduce over the term of the mortgage
- The capital and interest payment proportions change over the term of the mortgage
The capital and interest payment proportions change over the term of the mortgage
Which of the following is true in relation to mortgages?
- A remortgage is a way of lenders charging a higher rate interest
- A remortgage is an additional loan from a new lender
- A second mortgage increases the loan from the same lender
- A second mortgage is an additional secured loan from a new lender
A second mortgage is an additional secured loan from a new lender
When contributing to a personal pension, what rate of tax relief is given at source?
20%
What is the maximum amount of capital protection, if any, offered by a structured investment?
- 0
- 50%
- 75%
- 100%
100%
Jon, a computer technician hurts one hand causing lasting damage and has to be re-employed part-time at a lower salary. What effect would his return to work have on his Income Protection Insurance (IPI) benefits?
Proportionate benefit may be paid until retirement
Mike is retiring from his company after 25 years. He is planing to take a cash lump sum of £30k and 12k p.a from his personal pension plan. What will the tax liability be on these benefits?
The lump sum will be tax free but he will pay income tax on the annual pension
The MAIN advantage of writing a life assurance policy in trust is to?
Place the proceeds outside the individual’s state
A couple have a standard variable rate mortgage which is due to be paid by a UK equity stocks and shares NISA. Which factor would most immediately adversely affect their monthly budgeting?
A rise in interest rates
Once an adviser has completed a fact find in respect of a client which of the following is a fundamental consideration that should ALWAYS be taken into account before making an investment recommendation?
- Attitude to risk
- Employment details
- Mortgage arrangements
- Number of dependants
Attitude to risk
What is the benefit of executing a deed of variation?
IHT advantages can be obtained
William has created a trust but still maintains ownership rights. This is because?
The trustees include William
Peter, an agent, has acted outside his authority in setting up an arrangement with a third party. Subsequently, his principal confirmed the arrangement with the third party. At what time, if any, did the arrangement first become binding on the principal?
When the principal communicated with the 3rd party
Does a limited company have full capacity to enter into a contract?
Yes
Peter, Paul and Pamela own a house on a tenants in common basis, each have a 1/3 share. In the event of Paul’s death..
The beneficiary of Paul’s share will be determined by his will or the laws of intestacy
What role does the court of protection play with respect to powers of attorney?
Both lasting powers and enduring powers can only be revoked by the CoP
Sarah has been advised that part of her overall income will be taxed at 10%. This confirms that she has?
Savings income
Sue’s building society pays a net interest rate of 4% on an element of her savings. She is a basic rate taxpayer. What is the equivalent gross rate?
Gross rate calculation = net divided by 0.8
= 5%
Jemma has capital losses that exceed gains made in the current tax year. What option doe she have in relation to the residual losses?
She can carry them forward to future years
Two newly appointed trustees have been advised that their CGT allowance will be 100% of the standard allowance rather than 50%. This is because?
They act as trustees for a mentally disabled person
A qualifying life policy is maturing and the owner has been advised that CGT will apply to the policy proceeds. This confirms that?
Ownership has changed hands
What is the stamp duty reserve on a purchase of bearer instruments with a market value of £100k?
£100k x 0.5 =
£1500
What benefit describes “A benefit for disabled people who need personal care at or after the age of 65”?
Attendance allowance
Fred makes a chargeable lifetime transfer of £1m. When will IHT always be payable?
Immediately 20%
Which of the following goods and services are exempt from VAT?
- Clothes
- Education
- Food
- Medicine
Education
What mortgage interest rate option always decreases when the lenders standards variable rate of interest reduces?
- Cap and collar mortgage
- A deferred interest mortgage
- A discounted mortgage
A discounted mortgage
What is Gross Domestic Product (GDP) a measure of the value of?
A measure of the value of goods and services within a country over a specified period of time
Which of the following do building societies and banks have in common?
- Absence of a requirement to hold general meetings
- Direct supervision by the BoE
- Ownership structure
- Shares traded on the Alternative investment market
Ownership structure (Both are mutual organisations and owned by their members)
How can a bank involved in wholesale banking normally raise money quickly to finance business activities?
From the interbank market
Diane has been told she must pay a certain class of national insurance typically on a TWICE yearly basis. This confirms that she is in what sort of employment?
Self-employed
Local authority stocks cannot be redeemed. True or False?
False
Daisy has recently purchased both gilt-edged securities and local authority bonds. In which primary way will they differ?
To way in which they are taxed
Jack purchased a share when the price has high. He is able to justify this because the price earnings ration was?
Above 20
For which type of share does a warrant holder have the right to subscribe?
Ordinary
Fluctuating currency values arise as a result of?
Supply and demand
A right to buy shares at a specified price by a certain date is a?
Call option
NS&I Income Bonds has the income paid gross but liable to tax. True or false?
True
Greg decided to invest in cumulative preference shares as he wanted to ensure that he?
- Had guaranteed security
- Intended to convert to ordinary shares
- Obtained some certainty regarding future dividend payment
- Was eager for capital growth
Obtained some certainty regarding future dividend payment
Jane, an additional rate taxpayer has a fixed interest unit trust from which she receives gross income of 2k p.a. How much tax will she have to pay?
- 200
- 400
- 500
- 600
£500 25%
Under the rules of an open-ended investment company, three of the following types of charges may be applied. Which is the exception?
- Administration costs
- Annual management charge
- Initial charge
- Policy fee
Policy fee (May be charged on a life policy, but not an OEIC)
Under a unit trust what does the cancellation price represent?
The minimum price in which investors may cash in their profits
What happens when an option reaches its maturity date?
The investor can choose to exercise the option at the predetermined price, or let the option lapse
Which of the following arrangements would help a person on a low income to become an owner occupier?
- Buy to let mortgage
- Lifetime mortgage
- Shared ownership
- Tracker-rate mortgage
Shared ownership
Julia is a higher rate taxpayer. She understands that she pays her pension net of tax relief to the product provider, and has to reclaim the remainder from HMRC. At what rate is this further relief reclaimed from HMRC?
20%
If Jamie and Chloe opt for a joint repayment mortgage, the most suitable way to ensure the loan will be repaid if one of them dies is by?
- Contributing to an IPI policy
- Investing in endowment assurance
- Making contributions to critical illness policy
- Taking out joint life first death protection assurance
TOJLFDPA
Which of the following life assurance policies usually carries the most investment risk?
- Unit-linked
- Unitised with-profits
- Non-profit
- With-profits
Unit-linked
If James was domiciled in the UK and dies, would all of his assets situated all over the world be liable to IHT?
Yes
A complaint is made against an independent financial advisor because?
- Their business card failed to mention their qualifications
- They failed to provide a key features document before the sale was closed
- The cancellation notice was sent by the provider
- The illustration had been prepares in advance by the product provider
They failed to provide a key features document before the sale was closed
A relationship between a financial adviser and a customer should be built on mutual…?
Trust
When an individual dies intestate, leaving a spouse, children and an estate valued at £210,000 how much does the spouse get?
All of it
Gwen wrote her will 5 years ago and a deed of variation has now been executed. This confirms that?
Gwen is now deceased
John is completing the proposal form for the level term assurance he is hoping to take out. Which of the following describes how he must answer the questions?
- By following the principle of ‘caveat emptor’
- By following the principles of upmost good faith
- By taking reasonable care not to make a mis-representation
- By volunteering all material facts
By taking reasonable care not to make a mis-representation
An agent has made an agreement outside the parameters of his authority laid down by the principal. Assuming a liability occurs, the agent will avoid this if?
Apparent authority has been given
What is the definition of an attorney?
Given authority to act on behalf of another person
One of the financial descriptions placed on undischarged bankrupts is that they are?
Only able to borrow nominal amounts of money
William was deemed to be an automatic resident in the UK for tax purposes in the previous tax year. What is the minimum number of days that he must of been in the UK in that tax year?
183 days
Who is allowed to use expenses to reduce income tax liability?
Employees, partners and sole traders
Donald has a 20 year endowment policy with a sum assured of £20k. Which of the following features is likely to make it subject to tax at maturity?
- The 1st years premium was £125 and the 10th years was £275
- The 1st years premium was £150 and the 10th was £290
- The premium ceases after 17 years
- The total premiums payable amounted to £22,500
The 1st years premium was £125 and the 10th was £275 (The 10th years premium was more than double the 1st making the policy non-qualifying and potentially subject to tax at maturity
Fiona an additional rate taxpayer sold shares at a gain of $41,100. How much CGT is liable for this sale?
41k - 11,100 (allowance) = 30k. 30k x 0.28 = £8,400
Which of the following statements in respect of CGT is true?
- CGT may be payable on a deceased person’s estate in addition to IHT
- Chargeable assets held within and outside the UK may be subject to CGT on disposal
- Investments bonds are subject to CGT because they are classed as unearned income
- The annual exemption allowance may be carried forward into a later tax year
Chargeable assets held within and outside the UK may be subject to CGT on disposal
When an antique was purchased for £20k the dealer’s fee was £2k, repair was £1.8k and improvements were £3k how much of these costs could be offset against capital gain?
£5000 (Repaid is not included)
Emma bought some shares by electronic transfer that cost her £3,500. How much stamp duty reserve tax must she pay?
£17.50 (£3,500 x 0.5%)
A claimant must be out of work or working less than 16 hours per week to claim Job Seeker’s Allowance. True or False?
True
For IHT purposes what is the maximum gift that can be given to a grandchild who is getting married without incurring tax?
- 1k
- 2.5k
- 3k
- 5k
£2,500
What rate of withholding tax is levied on non-resident entertainers and sportspeople in the UK?
20%
The BoE’s inflation target is that the annual rate of CPI inflation will be between?
1-3%
What types of policy are used to achieve the Government’s long term economic objectives?
Monetary and Fiscal
A fixed rate mortgage often has early repayment charges for switching to another provider. True or False?
True
