THE CHARTERED INSTITUTE OF TAXATION
APPLICATION AND PROFESSIONAL SKILLS
Taxation of Individuals
November 2021
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.
• Except as set out below or indicated by additional information in the question, you may assume that
2020/21 legislation (including rates and allowances) continues to apply for 2021/22 and future years.
1) You MUST assume that the UK remains within the European Union.
2) You MUST ignore all temporary Covid related legislation including furlough, grants, loans and the
reductions in VAT and SDLT rates.
Except in relation to points 1) and 2) above, 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 manager in a firm of Chartered Tax Advisers. Your tax partner, Sally Jones, recently met
with new clients Jack Clarke and Beth Roberts (see EXHIBIT A), who are engaged to be married in
September 2022.
Jack is divorced and has a child, Oscar, from his previous relationship with Rebecca. Currently, Jack,
Beth and Oscar live in the property which Jack bought with Rebecca. Beth lets out her former home.
Jack and Beth are keen to buy a new home together and they wish to structure their tax affairs in the most
efficient way both before and after their marriage.
The following exhibits are provided to assist you:
EXHIBIT A: Notes of a meeting with Jack and Beth
EXHIBIT B: Extract from Jack and Rebecca’s separation contract
EXHIBIT C: Email from Jack
EXHIBIT D: Pre-seen information
Requirement:
Prepare a draft report for review by your tax partner advising Jack and Beth on their proposed
property transactions and general tax planning given their forthcoming marriage.
Continued
Page 2 of 5 APS IND
,Continuation
EXHIBIT A
Notes of a meeting with Jack and Beth
Present: Sally Jones, Jack Clarke, Beth Roberts
Date: 30 October 2021
Jack and Beth are new clients to the firm. They have been in a relationship for five years. They currently
live together in Jack’s home, The Old Rectory, with Jack’s son, Oscar.
Jack originally bought The Old Rectory in March 2005 with his ex-partner, Rebecca. Jack and Rebecca
were not married, but they lived together in The Old Rectory as their main residence from the date of
purchase. They separated five years later, in March 2010, at which point Rebecca moved out of The Old
Rectory into rented accommodation in Bath. However, because Jack did not have the financial means to
buy Rebecca’s share of the property, a contract was made such that, out of the two of them, only Jack
could remain living in the house. The contract did not create a trust. A copy of the contract was provided
in the meeting (EXHIBIT B).
Beth moved in with Jack in December 2019, at which point she started to let her former home,
22 Westland Road. However, the arrangement caused tension with Rebecca, so Jack and Beth would
like to buy a new home together as soon as possible and downsize from The Old Rectory. In addition,
they would like to move closer to where Oscar wants to study for his A Levels.
Jack and Beth have obtained valuations of their properties as follows:
Property Market value
The Old Rectory £900,000
22 Westland Road £450,000
There is no expectation of a material change in these values over the next few years.
They consider that they have two options to fund the purchase of their new property, for which they
have a budget of £450,000:
1) Sell The Old Rectory and use Jack’s share of the proceeds to fund the purchase of the new
property. In this event, Beth would continue to let 22 Westland Road. However, The Old Rectory
can only be sold prior to the marriage with Rebecca’s consent.
2) Sell 22 Westland Road and use the proceeds to buy their new home, which could happen either
before or after they marry. The Old Rectory would be sold in any event once Jack and Beth marry,
under the terms of Jack’s contract with his ex-wife. £400,000 of Jack’s share of the proceeds from
the sale of The Old Rectory would be invested in a further buy-to-let property. The remaining
£50,000 would be invested in a savings account.
They would like advice as to which option is best and whether it will make a difference if transactions take
place before or after their marriage.
They would also like advice on mitigating their overall exposure to Income Tax and Inheritance Tax.
Jack and Beth are happy to pool their income and assets, but they have made arrangements to protect
their own interests as well as those of any beneficiaries, including Oscar, in the event of their separation
or the death of either of them. No advice is required on this point.
Continued
Page 3 of 5 APS IND
, Continuation
EXHIBIT B
Extract from Jack and Rebecca’s separation contract
Dated this ninth day of March, 2010
The Old Rectory
(a) Mr Clarke shall be entitled to occupy the property registered at HM Land Registry under title
number CE7535487 (‘The Old Rectory’) rent free to the exclusion of Ms Ferncroft until the
determining event (as hereafter defined);
(b) Subject to paragraph (c), the property shall not be sold without the prior written consent of both
parties, which shall not be unreasonably withheld, and then only after the first to happen of the
following events (“the determining event”), namely:
i. The surviving child of the parties attaining the age of eighteen years; or
ii. The death of either party; or
iii. The remarriage of either party.
(c) Notwithstanding paragraph (b), the parties may agree to sell the property prior to the occurrence
of the determining event.
(d) Mr Clarke undertakes to indemnify Ms Ferncroft as to 50% of her liability for Capital Gains Tax
consequent upon sale of The Old Rectory.
EXHIBIT C
Email from Jack
To: Sally Jones
From: Jack Clarke
Date: 2 November 2021
Subject: Rebecca’s income
Dear Sally
Thanks so much for your time the other day.
You asked me to provide information on Rebecca’s financial circumstances in case it is relevant to the
report you will be drafting.
She has informed me that her current salary is £40,000 per annum and that she does not have any other
income. She does not own any other assets apart from her share of The Old Rectory.
I hope this helps.
Kind regards
Jack
Continued
Page 4 of 5 APS IND
APPLICATION AND PROFESSIONAL SKILLS
Taxation of Individuals
November 2021
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.
• Except as set out below or indicated by additional information in the question, you may assume that
2020/21 legislation (including rates and allowances) continues to apply for 2021/22 and future years.
1) You MUST assume that the UK remains within the European Union.
2) You MUST ignore all temporary Covid related legislation including furlough, grants, loans and the
reductions in VAT and SDLT rates.
Except in relation to points 1) and 2) above, 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 manager in a firm of Chartered Tax Advisers. Your tax partner, Sally Jones, recently met
with new clients Jack Clarke and Beth Roberts (see EXHIBIT A), who are engaged to be married in
September 2022.
Jack is divorced and has a child, Oscar, from his previous relationship with Rebecca. Currently, Jack,
Beth and Oscar live in the property which Jack bought with Rebecca. Beth lets out her former home.
Jack and Beth are keen to buy a new home together and they wish to structure their tax affairs in the most
efficient way both before and after their marriage.
The following exhibits are provided to assist you:
EXHIBIT A: Notes of a meeting with Jack and Beth
EXHIBIT B: Extract from Jack and Rebecca’s separation contract
EXHIBIT C: Email from Jack
EXHIBIT D: Pre-seen information
Requirement:
Prepare a draft report for review by your tax partner advising Jack and Beth on their proposed
property transactions and general tax planning given their forthcoming marriage.
Continued
Page 2 of 5 APS IND
,Continuation
EXHIBIT A
Notes of a meeting with Jack and Beth
Present: Sally Jones, Jack Clarke, Beth Roberts
Date: 30 October 2021
Jack and Beth are new clients to the firm. They have been in a relationship for five years. They currently
live together in Jack’s home, The Old Rectory, with Jack’s son, Oscar.
Jack originally bought The Old Rectory in March 2005 with his ex-partner, Rebecca. Jack and Rebecca
were not married, but they lived together in The Old Rectory as their main residence from the date of
purchase. They separated five years later, in March 2010, at which point Rebecca moved out of The Old
Rectory into rented accommodation in Bath. However, because Jack did not have the financial means to
buy Rebecca’s share of the property, a contract was made such that, out of the two of them, only Jack
could remain living in the house. The contract did not create a trust. A copy of the contract was provided
in the meeting (EXHIBIT B).
Beth moved in with Jack in December 2019, at which point she started to let her former home,
22 Westland Road. However, the arrangement caused tension with Rebecca, so Jack and Beth would
like to buy a new home together as soon as possible and downsize from The Old Rectory. In addition,
they would like to move closer to where Oscar wants to study for his A Levels.
Jack and Beth have obtained valuations of their properties as follows:
Property Market value
The Old Rectory £900,000
22 Westland Road £450,000
There is no expectation of a material change in these values over the next few years.
They consider that they have two options to fund the purchase of their new property, for which they
have a budget of £450,000:
1) Sell The Old Rectory and use Jack’s share of the proceeds to fund the purchase of the new
property. In this event, Beth would continue to let 22 Westland Road. However, The Old Rectory
can only be sold prior to the marriage with Rebecca’s consent.
2) Sell 22 Westland Road and use the proceeds to buy their new home, which could happen either
before or after they marry. The Old Rectory would be sold in any event once Jack and Beth marry,
under the terms of Jack’s contract with his ex-wife. £400,000 of Jack’s share of the proceeds from
the sale of The Old Rectory would be invested in a further buy-to-let property. The remaining
£50,000 would be invested in a savings account.
They would like advice as to which option is best and whether it will make a difference if transactions take
place before or after their marriage.
They would also like advice on mitigating their overall exposure to Income Tax and Inheritance Tax.
Jack and Beth are happy to pool their income and assets, but they have made arrangements to protect
their own interests as well as those of any beneficiaries, including Oscar, in the event of their separation
or the death of either of them. No advice is required on this point.
Continued
Page 3 of 5 APS IND
, Continuation
EXHIBIT B
Extract from Jack and Rebecca’s separation contract
Dated this ninth day of March, 2010
The Old Rectory
(a) Mr Clarke shall be entitled to occupy the property registered at HM Land Registry under title
number CE7535487 (‘The Old Rectory’) rent free to the exclusion of Ms Ferncroft until the
determining event (as hereafter defined);
(b) Subject to paragraph (c), the property shall not be sold without the prior written consent of both
parties, which shall not be unreasonably withheld, and then only after the first to happen of the
following events (“the determining event”), namely:
i. The surviving child of the parties attaining the age of eighteen years; or
ii. The death of either party; or
iii. The remarriage of either party.
(c) Notwithstanding paragraph (b), the parties may agree to sell the property prior to the occurrence
of the determining event.
(d) Mr Clarke undertakes to indemnify Ms Ferncroft as to 50% of her liability for Capital Gains Tax
consequent upon sale of The Old Rectory.
EXHIBIT C
Email from Jack
To: Sally Jones
From: Jack Clarke
Date: 2 November 2021
Subject: Rebecca’s income
Dear Sally
Thanks so much for your time the other day.
You asked me to provide information on Rebecca’s financial circumstances in case it is relevant to the
report you will be drafting.
She has informed me that her current salary is £40,000 per annum and that she does not have any other
income. She does not own any other assets apart from her share of The Old Rectory.
I hope this helps.
Kind regards
Jack
Continued
Page 4 of 5 APS IND
