THE CHARTERED INSTITUTE OF TAXATION
APPLICATION AND PROFESSIONAL SKILLS
Inheritance Tax, Trusts & Estates
November 2022
TIME ALLOWED
3 HOURS 30 MINUTES
• In order to secure a pass in this exam, you will be required to demonstrate competence in each of
three skills.
You will be assessed across your answer as a whole for Structure. A pass or fail grade will be
awarded.
You will be assessed for competence in a number of broad topics for the following skills:
➢ Identification and Application
➢ Relevant Advice and Substantiated Conclusions
For each topic for each of these two skills, a grade will be awarded. The grades for those topics will
be weighted and averaged to produce a final grade for each skill of 0, 1, 2, 3 or 4. A grade of 3 or 4
is required to demonstrate competence.
• All workings should be shown and made to the nearest month and pound unless the question specifies
otherwise.
• Candidates who answer any law elements in this paper in accordance with Scots law or Northern
Ireland law should indicate this where relevant.
• Scots law candidates may provide answers referring to Land and Buildings Transaction Tax rather
than Stamp Duty Land Tax.
• Unless otherwise indicated by the provision of additional information in the question, you may assume
that 2021/22 legislation (including rates and allowances) continues to apply for 2022/23 and future
years. Candidates answering by reference to more recently enacted legislation or tax cases will not
be penalised.
• You must type your answer in the space on the screen as indicated by the Exam4 guidance.
,You are a tax senior in a firm of Chartered Tax Advisers. Your tax director, Tony Jones, has received an
email (EXHIBIT A) from a new client, Mrs Julia Upton.
Julia has not undertaken any previous planning and does not have a Will at present.
Tony has asked you to review the email alongside the updated asset listings (EXHIBIT B) and the financial
information for Lakeside Home Furnishings Ltd (EXHIBIT C) before preparing a draft report to Julia
addressing her queries.
The following exhibits are provided to assist you:
EXHIBIT A: Email from Julia Upton to Tony Jones
EXHIBIT B: Valuation of Julia Upton’s assets
EXHIBIT C: Financial information for Lakeside Home Furnishings Ltd
EXHIBIT D: Pre-seen information
Requirement:
Prepare a draft report to Julia Upton, for review by Tony Jones, which advises on her current
estate situation and recommends any actions which she should take.
,Continuation
EXHIBIT A
Email from Julia Upton to Tony Jones
From: Julia Upton
To: Tony Jones
Date: 25 October 2022 09:58am
Dear Tony
It was good to meet with you and your team last week and I look forward to working with you over the
coming years. I am very interested to hear your suggestions for estate planning options as I am keen to
pass as much of my surplus wealth as possible to my children. I would like you to report back to me with
your proposals.
As we discussed, I do not have a Will at present. On my death I want to benefit my husband, Jonathan,
initially and then for my assets to be split equally between all four of our children. I have attached our
current asset list to this email (EXHIBIT B).
Jonathan doesn’t have a Will either at the moment and is reluctant to make one as it makes him think
about his own mortality! In case he doesn’t get around to making one, I want to make sure my Will, if I
need one, works as a standalone document.
Neither I nor Jonathan have any health concerns, but I thought I should start to get things in order.
Jonathan’s only assets are his half share of our property, his bank accounts and his pension fund.
I need to leave instructions to Jonathan and the older children to ensure my wishes are followed:
1) Jacob is struggling with a gambling addiction. For this reason, I would not want him to receive a
large amount of money until he is in recovery and managing his addiction successfully. I have
discussed this with him, and he agrees entirely.
2) Emma is still very young and so it is hard to judge how financially responsible she will become. If
she is not responsible with money, I think she should only receive her inheritance when she reaches
25.
We discussed that now the children are getting older and starting to leave home, we may want to sell our
current property and purchase a much smaller home costing around £250,000. We are likely to sell next
August but we want to understand the taxation implications in advance. We haven’t always lived in our
current property and only moved here in August 1998 – before this we used to rent the property out to
tourists. Once we have sold, we may at some point in the future consider gifting surplus cash but I don’t
want to consider this for a few years yet.
We also discussed the company at our meeting. Our accountant, Jenny, has forwarded the latest
summary profit and loss account and the balance sheet. I have attached these to this email (EXHIBIT C).
I have owned 100% of the company since incorporation and I have no plans to sell the company. The
management team run the company and so the children could simply become shareholders in due course
and they would not need to be involved in the day to day activities. The business is now well established
and we receive only small salaries equal to the level of the personal allowance and company pension
contributions but it is sufficient and we don’t need this to increase.
I look forward to hearing from you soon.
Warmest regards
Julia
, Continuation
EXHIBIT B
Valuation of Julia Upton’s assets
Land and Property
Address Detail Market Value Market Value of
of property in whole property
1993
£ £
Lakeside Lodge Main residence 125,000 900,000
Coniston Water (held as tenants in common with Jonathan)
LA23
Bank Accounts Balance
£
UK Current account* 10,000
UK Savings account* 40,000
50,000
*Jonathan holds near
identical cash levels in
his current and
savings bank
accounts.
Investments and Related Assets
Investments Cost Market Value
£ £
Stock and Shares ISA Account – all shares quoted on the
40,000 90,000
London Stock Exchange
100% shareholding in Lakeside Home Furnishings Ltd 100 700,000
Directors Loan due from Lakeside Home Furnishings Ltd 200,000
(Interest free)
40,100 990,000
Pension Market Value
£
Self-Invested Personal Pension (SIPP)* 500,000
*Jonathan has an identical pension as we have always made the same contributions and investments.
APPLICATION AND PROFESSIONAL SKILLS
Inheritance Tax, Trusts & Estates
November 2022
TIME ALLOWED
3 HOURS 30 MINUTES
• In order to secure a pass in this exam, you will be required to demonstrate competence in each of
three skills.
You will be assessed across your answer as a whole for Structure. A pass or fail grade will be
awarded.
You will be assessed for competence in a number of broad topics for the following skills:
➢ Identification and Application
➢ Relevant Advice and Substantiated Conclusions
For each topic for each of these two skills, a grade will be awarded. The grades for those topics will
be weighted and averaged to produce a final grade for each skill of 0, 1, 2, 3 or 4. A grade of 3 or 4
is required to demonstrate competence.
• All workings should be shown and made to the nearest month and pound unless the question specifies
otherwise.
• Candidates who answer any law elements in this paper in accordance with Scots law or Northern
Ireland law should indicate this where relevant.
• Scots law candidates may provide answers referring to Land and Buildings Transaction Tax rather
than Stamp Duty Land Tax.
• Unless otherwise indicated by the provision of additional information in the question, you may assume
that 2021/22 legislation (including rates and allowances) continues to apply for 2022/23 and future
years. Candidates answering by reference to more recently enacted legislation or tax cases will not
be penalised.
• You must type your answer in the space on the screen as indicated by the Exam4 guidance.
,You are a tax senior in a firm of Chartered Tax Advisers. Your tax director, Tony Jones, has received an
email (EXHIBIT A) from a new client, Mrs Julia Upton.
Julia has not undertaken any previous planning and does not have a Will at present.
Tony has asked you to review the email alongside the updated asset listings (EXHIBIT B) and the financial
information for Lakeside Home Furnishings Ltd (EXHIBIT C) before preparing a draft report to Julia
addressing her queries.
The following exhibits are provided to assist you:
EXHIBIT A: Email from Julia Upton to Tony Jones
EXHIBIT B: Valuation of Julia Upton’s assets
EXHIBIT C: Financial information for Lakeside Home Furnishings Ltd
EXHIBIT D: Pre-seen information
Requirement:
Prepare a draft report to Julia Upton, for review by Tony Jones, which advises on her current
estate situation and recommends any actions which she should take.
,Continuation
EXHIBIT A
Email from Julia Upton to Tony Jones
From: Julia Upton
To: Tony Jones
Date: 25 October 2022 09:58am
Dear Tony
It was good to meet with you and your team last week and I look forward to working with you over the
coming years. I am very interested to hear your suggestions for estate planning options as I am keen to
pass as much of my surplus wealth as possible to my children. I would like you to report back to me with
your proposals.
As we discussed, I do not have a Will at present. On my death I want to benefit my husband, Jonathan,
initially and then for my assets to be split equally between all four of our children. I have attached our
current asset list to this email (EXHIBIT B).
Jonathan doesn’t have a Will either at the moment and is reluctant to make one as it makes him think
about his own mortality! In case he doesn’t get around to making one, I want to make sure my Will, if I
need one, works as a standalone document.
Neither I nor Jonathan have any health concerns, but I thought I should start to get things in order.
Jonathan’s only assets are his half share of our property, his bank accounts and his pension fund.
I need to leave instructions to Jonathan and the older children to ensure my wishes are followed:
1) Jacob is struggling with a gambling addiction. For this reason, I would not want him to receive a
large amount of money until he is in recovery and managing his addiction successfully. I have
discussed this with him, and he agrees entirely.
2) Emma is still very young and so it is hard to judge how financially responsible she will become. If
she is not responsible with money, I think she should only receive her inheritance when she reaches
25.
We discussed that now the children are getting older and starting to leave home, we may want to sell our
current property and purchase a much smaller home costing around £250,000. We are likely to sell next
August but we want to understand the taxation implications in advance. We haven’t always lived in our
current property and only moved here in August 1998 – before this we used to rent the property out to
tourists. Once we have sold, we may at some point in the future consider gifting surplus cash but I don’t
want to consider this for a few years yet.
We also discussed the company at our meeting. Our accountant, Jenny, has forwarded the latest
summary profit and loss account and the balance sheet. I have attached these to this email (EXHIBIT C).
I have owned 100% of the company since incorporation and I have no plans to sell the company. The
management team run the company and so the children could simply become shareholders in due course
and they would not need to be involved in the day to day activities. The business is now well established
and we receive only small salaries equal to the level of the personal allowance and company pension
contributions but it is sufficient and we don’t need this to increase.
I look forward to hearing from you soon.
Warmest regards
Julia
, Continuation
EXHIBIT B
Valuation of Julia Upton’s assets
Land and Property
Address Detail Market Value Market Value of
of property in whole property
1993
£ £
Lakeside Lodge Main residence 125,000 900,000
Coniston Water (held as tenants in common with Jonathan)
LA23
Bank Accounts Balance
£
UK Current account* 10,000
UK Savings account* 40,000
50,000
*Jonathan holds near
identical cash levels in
his current and
savings bank
accounts.
Investments and Related Assets
Investments Cost Market Value
£ £
Stock and Shares ISA Account – all shares quoted on the
40,000 90,000
London Stock Exchange
100% shareholding in Lakeside Home Furnishings Ltd 100 700,000
Directors Loan due from Lakeside Home Furnishings Ltd 200,000
(Interest free)
40,100 990,000
Pension Market Value
£
Self-Invested Personal Pension (SIPP)* 500,000
*Jonathan has an identical pension as we have always made the same contributions and investments.
