ACCA F6 : Taxation And Pension Contributions! Trivia Quiz

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ACCA F6 : Taxation And Pension Contributions! Trivia Quiz - Quiz

MCQ quiz of Chapter 5 of ACCA F6 Taxation (Pension)


Questions and Answers
  • 1. 

    Two types of pension are Personal Pension and __________  Pension.

    • A.

      Job

    • B.

      Work

    • C.

      Occupational

    • D.

      Professional

    Correct Answer
    C. Occupational
    Explanation
    Explanation: Pension purchased privately by an individual, whether employed, self-employed or else, is called Personal Pension Scheme. Pension arrangement created by the employer is known as Occupational Pension.

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  • 2. 

    _______________ is also known as Money Purchase Scheme.

    • A.

      Personal Pension

    • B.

      Occupational Pension

    • C.

      Defined Benefit

    • D.

      Defined Contribution

    Correct Answer
    D. Defined Contribution
    Explanation
    Explanation: Occupational Pension Scheme could be Defined Benefit or Defined Contribution scheme (Money Purchase Scheme). Defined benefit (also known as final salary scheme) is a scheme where employee contributes a part of his earnings and the benefits are based on the final salary being drawn by an employee. Money purchase/ defined contribution scheme builds the contributions over years and these are returned to the pensioner based on the performance of investment and total contribution.

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  • 3. 

    An individual can contribute in __________ pension scheme(s) subject to certain limits.

    • A.

      More than one

    • B.

      Only One

    • C.

      Less than one

    Correct Answer
    A. More than one
    Explanation
    Explanation: An individual can actually contribute towards more than one pension schemes.

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  • 4. 

    Tax relievable pension contributions can be made by a person under the age of:

    • A.

      55

    • B.

      65

    • C.

      75

    • D.

      85

    Correct Answer
    C. 75
    Explanation
    Explanation: Pension contributions can be made by a person aged less than 75 years of age.

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  • 5. 

    The minimum amount of pension contributions that can be made by anyone (less than 75) is:

    • A.

      £1,000

    • B.

      £2,500

    • C.

      £3,600

    • D.

      £10,000

    Correct Answer
    C. £3,600
    Explanation
    Explanation: Anyone can make pension contributions up to £3,600.

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  • 6. 

    Relevant earnings, in respect of an individual for pension contributions, is broadly:

    • A.

      Employment Income, Trading Income and Furnished Holiday Lettings

    • B.

      Employment Income, Trading Income and Rental Income

    • C.

      Employment Income, Trading Income and Patent & Royalties

    • D.

      Employment Income, Trading Income and Dividends

    Correct Answer
    A. Employment Income, Trading Income and Furnished Holiday Lettings
    Explanation
    Explanation: Relevant earnings broadly comprise of Employment & Trading Income and Income from Furnished Holiday Lettings.

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  • 7. 

    Romeo earned £10,000 from his employment, £5,000 from self-employment, £2,000 gross from dividends and £3,000 net from Building Society Interest. The maximum contribution that attracts tax relief is:

    • A.

      £3,600

    • B.

      £10,000

    • C.

      £15,000

    • D.

      £20,000

    Correct Answer
    C. £15,000
    Explanation
    Explanation: Maximum pension contributions attracting tax relief is greater of £3,600 or relevant earnings which are income from employment, self-employment and furnished holiday lettings. In this case, it is 10,000 + 5,000 = £15,000.

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  • 8. 

    If a person with relevant earnings of £15,000 pays £10,000 to an HMRC approved pension scheme (personal); his pension fund will increase by:

    • A.

      £3,600

    • B.

      £10,000

    • C.

      £12,500

    • D.

      £15,000

    Correct Answer
    C. £12,500
    Explanation
    Explanation: Payment up to the higher of relevant earnings or £3,600 is deemed to be made net of 20%. Hence, in this case, the person pays £10,000 and will be considered to be paying net off basic rate tax. Hence his fund will increase by £12,500 that is 10,000 X 100/80.

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  • 9. 

    Annual allowance (maximum amount that can be contributed each year) for £2011/12 is:

    • A.

      £25,000

    • B.

      £50,000

    • C.

      £75,000

    • D.

      £ 80,000

    Correct Answer
    B. £50,000
    Explanation
    Explanation: Maximum pension contributions in a tax year are £50,000 for tax year 2011/12. Unused limit can be carried forward to 3 years.

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  • 10. 

    George contributed £30,000, £40,000, £50,000 and £60,000 gross personal pension contributions in the tax years 2007/08, 2008/09, 2009/10 and 2010/11. What is the maximum contribution the person can make in 2011/12 attracting tax relief?

    • A.

      £40,000

    • B.

      £50,000

    • C.

      £60,000

    • D.

      £70,000

    Correct Answer
    C. £60,000
    Explanation
    Explanation: Annual allowance can be carried forward to a maximum of three years. Unused allowance for 2007/08 can be carried forward to 2008/09, 2009/10 and 2010/11. The excess of £2010/11 will be covered by the unused allowance of £2007/08. For 2011/12, the unused allowance for 2008/09 can be used which is £10,000. Hence the total is 50,000 + 10,000 = £60,000.

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  • 11. 

    Trow made £5,000 contributions in excess of the annual allowance who is additional rate taxpayer. The treatment of the excess of contribution over the annual allowance is:

    • A.

      £5,000 will be considered as non-savings income and he will pay tax on the same

    • B.

      There will be no additional tax payable

    • C.

      £5,000 will be reduced from the non-savings income

    • D.

      £5,000 will be deducted from the annual allowance of next year

    Correct Answer
    A. £5,000 will be considered as non-savings income and he will pay tax on the same
    Explanation
    Explanation: Excess contributions are added in non-savings income and are taxed accordingly.

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  • 12. 

    Pension fund can be utilized when a person reaches the age of:

    • A.

      45

    • B.

      55

    • C.

      65

    • D.

      75

    Correct Answer
    B. 55
    Explanation
    Explanation: Pension funds can be used when the person reaches the age of 55.

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  • 13. 

    Lifetime allowance for 2011/12 is:

    • A.

      £1,000,000

    • B.

      £1,400,000

    • C.

      £1,800,000

    • D.

      £2,200,000

    Correct Answer
    C. £1,800,000
    Explanation
    Explanation: Lifetime allowance is £1,800,000.

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  • 14. 

    If the pension fund exceeds annual allowance at the time benefit is started (vested), the excess over £1,800,000 will give rise to:

    • A.

      Excess being penalized at 10%

    • B.

      55% taxed if excess value withdrawn

    • C.

      25% taxed if excess value withdrawn

    • D.

      All taxed at 10%

    Correct Answer
    B. 55% taxed if excess value withdrawn
    Explanation
    Explanation: If the pension fund exceeds £1,800,000 when “vested”, the excess is charged at 55% if funds are withdrawn and 25% if funds are left in scheme to provide annuity.

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  • Current Version
  • Mar 21, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Feb 28, 2012
    Quiz Created by
    LFTC2011

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