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CISI Level 6 Past Papers

HR246HR246 Member
in CPD & Exams

Hi everyone,

I've been working my way through the CISI Advanced Financial Planning past papers in preparation for the upcoming exam and something has got me scratching my head. It's probably quite simple but I just can't work it out!

Here is the exam paper: https://www.cisi.org/Public/Qualifications/AFP Sept 21 exam paper v2.pdf

Here is the marking scheme:
https://www.cisi.org/Public/Qualifications/AFP Sept 21 Chief Examiners Report.pdf

For question 14a, they've extended John's basic rate band by £6,250, which is his grossed up SIPP contribution. Why have they done this? I thought that your basic rate band got extended to provide higher rate tax relief, but only to the extent that you have actually paid higher rate tax. They've deducted his occupational pension contribution from his income, so he's already got full tax relief on that contribution, and the income he actually pays tax on is only £50,500. Can anyone work this out? Alternatively if anyone knows any good study groups for this exam please let me know!

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  • benjaminfabibenjaminfabi Moderator

    Hi,

    The basic rate band gets extended by the amount of any grossed up pension and charity contributions. Relief at the higher rate is given on all income.

    It doesn't matter how much you extend the band over what income they have, because the calculation only relieves income they actually receive. In this case, £500 of income is in the higher rate before the band is extended.

    The impact of any amount over £500 being added to the basic rate band is £0. You could extend the basic rate band by £25,000, they'll still only get relief on the actual income they receive.

    In this case, you're being asked to look at the 2020-21 position, which includes the proposed £6,000 salary sacrifice arrangement (which is not being added to the income as it has already been fully relieved) and the £5,000 net contribution John made to his SIPP (which is being grossed up to £6,250 and added to the basic rate band).

    Benjamin Fabi 
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  • HR246HR246 Member

    @benjaminfabi said:
    Hi,

    The basic rate band gets extended by the amount of any grossed up pension and charity contributions. Relief at the higher rate is given on all income.

    It doesn't matter how much you extend the band over what income they have, because the calculation only relieves income they actually receive. In this case, £500 of income is in the higher rate before the band is extended.

    The impact of any amount over £500 being added to the basic rate band is £0. You could extend the basic rate band by £25,000, they'll still only get relief on the actual income they receive.

    In this case, you're being asked to look at the 2020-21 position, which includes the proposed £6,000 salary sacrifice arrangement (which is not being added to the income as it has already been fully relieved) and the £5,000 net contribution John made to his SIPP (which is being grossed up to £6,250 and added to the basic rate band).

    Thanks so much! Now you've explained it, it makes total sense.

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