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IMC Unit 1 Practice Exam: Advanced Compliance

Q: Leigh makes a gift of her second home to her daughter and retains no interest. How many years must Leigh survive for the gift to be fully exempt from Inheritance Tax?

Under the 7-year rule, lifetime gifts to individuals become fully exempt from IHT if the donor survives for seven years post-gift.

Q: A higher rate taxpayer receives dividend income of 6,000 pounds. Excluding the dividend allowance, how much tax is due on the remaining dividend income?

After the 500 pound allowance, 5,500 pounds is taxed at the 33.75 percent higher rate dividend tax. 5,500 * 0.3375 = 1,856.25 pounds.

Q: Under which circumstance is a UK investment firm normally required to undertake enhanced due diligence (EDD)?

EDD is a mandatory requirement for PEPs due to the increased risk of financial crimes and political influence.

Q: How often must a statement of funding principles for an occupational pension scheme be reviewed?

Statutory regulations require trustees to review and update the statement of funding principles at least every three years.

IMC Test 04: Key Study Themes

This exam assesses Tax Efficiency, Money Laundering Regulations, and FCA Conduct Standards.

Tax Strategy: Gifts made to individuals are considered "Potentially Exempt Transfers" (PETs) and fall out of the donor's estate for IHT purposes after 7 years.

AML Compliance: Enhanced Due Diligence (EDD) is mandatory for Politically Exposed Persons (PEPs) due to the higher risk of corruption or money laundering.

Regulatory Duty: "Tipping off" a client that a report of suspicious activity has been filed is a criminal offense under the Proceeds of Crime Act.

Edited by: Test-Questions.com

Last Updated: March 09, 2026

Q:1Leigh makes a gift of her second home to her daughter and retains no interest. How many years must Leigh survive for the gift to be fully exempt from Inheritance Tax?

3 years

5 years

6 years

7 years

Q:2A higher rate taxpayer receives dividend income of 6,000 pounds. Excluding the dividend allowance, how much tax is due on the remaining dividend income?

1,100 pounds

1,200 pounds

1,300 pounds

1,856 pounds

Q:3Under which circumstance is a UK investment firm normally required to undertake enhanced due diligence (EDD)?

Where the client is new to the firm

Where the client is based outside the UK

Where the client is a Politically Exposed Person (PEP)

Where the client is referred by an overseas firm

Q:4How often must a statement of funding principles for an occupational pension scheme be reviewed?

Every 6 months

Every 1 year

Every 3 years

Every 5 years

Q:5Dwayne sells ISA-held shares for a 13,000 pound gain. Given the CGT allowance is ... [Show Full Question 5]

2,000 pounds

1,300 pounds

130 pounds

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Q:6When executing client transactions, which actions are required?
(i) Being alert to money laundering
(ii) ... [Show Full Question 6]

(i) only

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(ii) and (iii) only

(i), (ii) and (iii)

Q:7Which service is NOT classed as an ... [Show Full Question 7]

Underwriting services

M&A advisory services

Investment research

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Q:8An investor holds wealth in fixed interest deposits. Which risks are increased by this strategy?
(i) ... [Show Full Question 8]

(i) only

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(ii) and (iii) only

(i), (ii) and (iii)

Q:9A company purchases residential property for 3,000,000 pounds. Assuming ... [Show Full Question 9]

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460,000 pounds

470,000 pounds

550,000 pounds

Q:10Which factor is most likely to increase an investor's tolerance ... [Show Full Question 10]

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Monthly income position

Tax status

Family situation

Q:11Which fund charges have the greatest ... [Show Full Question 11]

Initial charges

Point of sale charges

Exit charges

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Q:12An investment manager sells their personal holding of a stock before disseminating ... [Show Full Question 12]

Standard I (Professionalism)

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Standard V(B) (Communication with clients)

Standard III(C) (Suitability)

Q:13Which Bank of England body is responsible for protecting ... [Show Full Question 13]

Financial Conduct Authority

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Monetary Policy Committee

Financial Services Compensation Scheme

Q:14What is considered good practice when ... [Show Full Question 14]

Gathering contradictory risk information

Using multiple ISAs due to poor record keeping

Ignoring a customer's tax position

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Q:15The Panel on Takeovers and Mergers (PTM) levy applies to trades of over 10,000 ... [Show Full Question 15]

Covered warrants

Debentures

American Depositary Receipts

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Q:16A purchase of 2,000 shares at 315.60p, with 6 pound commission and 0.5 percent SDRT, and ... [Show Full Question 16]

45.54 pounds

47.52 pounds

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44.58 pounds

Q:17Which statement is least accurate regarding ... [Show Full Question 17]

Tax-free dividends regardless of holding period

30 percent tax reduction on initial investment

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The VCT itself has tax-exempt capital gains

Q:18A firm adopting the alternative client money approach ... [Show Full Question 18]

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That the Board is satisfied the normal approach is inappropriate.

That external auditors confirm the required systems are in place.

That the compliance officer confirms the systems are in place.

Q:19How often must a firm provide a periodic statement to a retail client for managed ... [Show Full Question 19]

1 month

3 months

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12 months

Q:20Authorised firms are prohibited from marketing Unregulated Collective ... [Show Full Question 20]

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Certified high-net-worth individuals.

Certified sophisticated investors.

Investment professionals.

Test 04 Study Summary

1. ISA Exemptions Gains realized on investments held within a stocks and shares ISA are entirely exempt from Capital Gains Tax.

2. SDLT Flat Rate Companies purchasing residential property over 500,000 pounds are subject to a flat 15 percent Stamp Duty Land Tax rate.

3. Management Charges Ongoing annual management charges have the most significant long-term impact on portfolio returns due to compounding effects.

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