Interior Design - Qp11

VAT stands for Value Added Tax, which is a consumption tax imposed on the value added to goods and services at each stage of production and distribution. It is commonly used by governments around the world to generate revenue and is typically included in the price of goods and services. Therefore, the statement "VAT stands for Value Added Tax" is true.

When you start trading, you are obliged by law to inform The Inland Revenue. This is because The Inland Revenue is responsible for collecting taxes and ensuring compliance with tax laws. By informing them about your trading activities, you are fulfilling your legal obligation to report your income and pay the appropriate taxes.

Professionals such as solicitors and architects mainly require professional indemnity insurance. This type of insurance provides coverage for claims made against professionals for negligence, errors, or omissions in their professional services. It protects professionals from financial losses and legal expenses that may arise from such claims. Given the nature of their work, where mistakes or errors can have significant consequences, professional indemnity insurance is crucial for professionals in these fields to safeguard their reputation and finances.

Goods in transit insurance is used to cover stock, equipment, and other items while they are being transported or delivered. This type of insurance provides protection against loss, damage, or theft that may occur during the transportation process. It is specifically designed to cover the risks associated with moving goods from one location to another. Motor insurance and employer's liability insurance, on the other hand, do not provide coverage for goods in transit and are not directly related to the transportation process.

The statement is true because employees of the company are required to pay income tax under the PAYE (Pay As You Earn) scheme. This means that the employer deducts the income tax from the employee's salary and pays it directly to the tax authorities on their behalf. The PAYE scheme ensures that income tax is collected in a timely and efficient manner, making it easier for employees to meet their tax obligations.

There are three rates of VAT.

In the context of sole traders, drawings refer to the money or assets that the owner takes out of the business for personal use. Since drawings are not considered as a business expense, they are not allowed to be deducted from the business's taxable income. Therefore, the statement that drawings are not an allowable expense for sole traders is true.

Sole traders will have to pay Class 4 National Insurance Contributions and Class 2 National Insurance Contributions if their profits are above a certain limit. Class 4 National Insurance Contributions are paid on profits above a certain threshold and are calculated based on the profits made. Class 2 National Insurance Contributions are a flat rate contribution that sole traders have to pay if their profits are above a certain limit. Both of these contributions are mandatory for sole traders whose profits exceed the specified threshold.

Employers should have a written health and safety policy if they have at least four employees. This statement is incorrect. In many countries, employers are required to have a written health and safety policy regardless of the number of employees. This policy outlines the employer's commitment to providing a safe and healthy workplace and sets out the procedures and guidelines for managing health and safety issues. It helps ensure that all employees are aware of their rights and responsibilities regarding health and safety in the workplace.

The statement is false because the income of a business owned by an independent trader is not considered personal income. In the case of a business, the income generated is separate from the personal income of the owner. The business income is treated as separate entity and is subject to taxation and other business-related regulations.