Principles of payroll Flashcards
(114 cards)
1
Q
What is the purpose of the strict rules and regulations around payroll? P109
A
- Correct amount - on/ before due date
- deadlines - HMRC, pension, external bodies
- prompt changes
2
Q
When must a person/ business register as an employer ? P109
A
- Employ staff
- Only employing themselves
3
Q
When in time must a business/ person register as an employer ? P110
A
- Before the first payday
- Not 2 months
4
Q
How long does it take a business to receive its PAYE reference number ? P110
A
- 5 working days
5
Q
What does the HMRC require for a business to register as an employer online, if it has an online tax account ? P110 - 10 points
A
- Unique Tax reference
- name
- address
- first payment date
- employee numbers
- register for CIS
- expenses and benefits
- sole trader/ director name
- sole trader/ director national insurance numbers
6
Q
Why are employers required to use computerised payroll software , and what process does it use to submit information to the HMRC ? P110
A
- Up to date info to HMRC
- Who they employ
- what they are paid for
- Real time information (RTI)
7
Q
What type of payroll software can a business use, depending on its size ? P110
A
- Commercial payroll bureau - HMRC behald of client
- purchase payroll software - recognised by HMRC
- payroll software - fewer than 10 employees
8
Q
Will the HMRC recommend payroll software ? P110
A
- No
- will test - paid for/ free
- PAYE info - online/ RTI
9
Q
What does the government set for each year, and when does the tax year run from and until ? P111
A
Tax rate and allowances - updated for each tax year
6th April - following 5th April
10
Q
When should a business ensure that it updates it payroll software ? P111
A
- From 6th April earrlier
- latest rates and threshold - income tax, national insurance, and student loan repayment
*
11
Q
When do tax months run ? P111
A
- 6th of one month to 5th of next
12
Q
What records do the HMRC requre an employer to collect and keep ? P111 - 7 points
A
- Employees pay and deduction
- reports - HMRC
- Payment - HMRC
- Emplyees leave and sickness absence
- Tax code notices
- Expenses / benefits
- Payroll - scheme documents
13
Q
How long should the records for payroll be kept? P111
A
- 3 years after end - tax year
- 6 year option - retention of other tax and accounting records
- electronic storing
14
Q
What is the fine for failing to keep payroll records ? P111
A
£3000
15
Q
The employees have the right to be told what about their data ? P112
A
- Records kept about them - how they’re used
- confidentiality
- training and development aid
16
Q
How long does an employer have to respond if an employee asks to see data kept about them ? P112
A
- 30 days - copy of information
17
Q
What regulation requires businsses to protect personal information they collect ? P113
A
General Data Protection Regulation (GDPR)
18
Q
What law controls how personal information is used by organisations, businsses, or the governemnt ? P113
A
Data Protection Act (2018)
19
Q
What do data protection principles require from organisations ? P113
A
- Fairly, lawfully, and transparently
- explicit purposes
- adequate, relevant , limited to neccesity
- kept up to date
- no longer than necessary
- appropriate security
20
Q
How does the HMRC go about checking the PAYE records of a business ? P113
A
- write/ phone
- visit
- failure = penalty
- reasonable excuse
21
Q
What will the HMRC do once it’s checked the PAYE records of a business ? P113
A
- Written results
- Paid too much = refund & interests (HMRC at fault)
- Paid too little = 30 days = interests from day due = sometimes penalty for reason
22
Q
What is gross pay ? P114
A
- before deduction - e.g. N.I
- annual amount
- per period
- per month
- hourly rate
- lump sum
23
Q
What are additional/ alternative pay that employees may be entitleed to ? P115
A
- Holiday pay
- sick pay
- maternity pay
- paternity pay
24
Q
What is taxable pay ? P115
A
- Gross pay - tax free elements
- Income tax charged
25
Is additional / alternative pay to gross pay subject to tax ? P115
* Yes
* Certain thresholds ( levels) exceeded
26
What is tax relief ? P115
* voluntary deduction permission - before income tax
* tax saved = tax relief
* ALSO - employee contributions - company pension
27
What is payroll giving ? P115
* Donations - charity
28
What is net pay ? P115
* Take home pay
* (total pay + allowances) - total deductions
29
What is a statutory deduction ? P116
Required by law
30
What is a non statutory deduction ? P116
emplyee must agree
31
What are the statutory deductions made from gross pay ? P116
* Pay as you earn (PAYE)
* National insurance contribution (NICs)
* student loans
* pensions
32
What is PAYE ? P116
* Sytem
* Income Tax
33
What is the amount of tax that an employee pays on their earnings determined by ? P116
Tax code
34
What does the number element of a tax code represent ? p116
* Multiply by 10
* Free pay
* untaxed pay
* employee's personal allowance
35
What is pay over the personal allowance for tax taxed as as ? P116
* basic rate percentage ( 20%)
* > higher rate threshold = higher rate percentage ( 40%)
* additional rate tax (45%) - above additional rate threshold
36
What does the letter in the tax code show ? P116
* Number adjustment = general changes
* avoids - new tax code notifications
37
What does the change of tax code during the tax year usually represent ? P116
* Employees - paid too much / too little
* collection / refund
* reinstating free pay entitlement
38
When is the only time an employer can change the tax code of an employee ? P116
* HMRC notification
* from next payday
* HMRC instruction
39
What is national insurance contributions ? p117
* compulsory payments
* state assistance - sick, unemployed , or retired, pension, job seeker's
40
What is the type of national insurance paid by employers and employees called ? P117
Class 1
41
What must individuals have to be eligible for a full state pension ? P117
* 35 years of wages > low earning limit for NI (£123) per week
* employees NI contribution > £242 week
42
What does the amount of class 1 NIC deducted from an employee's pay depend on ? P117
* earning within certain bands
43
When do **employers** pay class 1 NIC ? P117
£175 per week exceeded (758 per month)
most emplyees = 13.8% pay
44
What is employment allowance ? P117
* Staff recruitment
* reduce their NIC liability
45
What makes a business/ charity eligible for employment allowance ? P117
* Previous tax year
* Employers' class 1 national insurance Liabilities £100,000 >
46
What does employment allowance allow ? P118
* Reduce NI liability by up to £5000 or less
* employer's class 1 NIC less each payroll
* max £5000 reached/ end of tax year = end of allowance
47
Where is the claim for employment allowance made ? P118
* Employer Payment Summary (EPS)
48
How is student loan paid back? P117
* Payroll at 9%
* annual earning threshold - government
49
What are pensions ? P118
* Saving for retirement
* employers offer - workplace pension scheme/ occupational works
* percentage of pay - pension scheme
* employer contribution most cases
* employee get tax relief
* automatic enrollment
50
When does automatic enrollment within pensions apply ? P118
* Classified as worker
* between aged 22 and state pension
* at least £10,000 per year
* work in UK
51
Can an employee still join a workplace pension if they've not been automatically enrolled ? P119
* Yes
* employer cannot refuse
52
What does the amount of payment into the pension scheme depend on ? P119
* Pension scheme - employer has chosen
53
# 11
What must be contributed into a pension scheme ? P119
* Employer Minimum of 3 %
* employee - 5%
* total minimum contribution = 8 %
54
What is included in pension scheme payments ? p119
* Salary / wages
* bonuses and commissions
* overtime
* statutory sick pay
* statutory maternity , paternity, adoption pay
55
When must an employer contribute to a pension, once the employee has voluntarily enrolled ? P119
* More than:
* £520 per month
* £120 a week
* £480 over 4 weeks
* nothing - these amount or less
56
What are examples of non statutory deductions other deductions from gross pay ? P119
* charitable giving - before tax , after NIC
* union membership fees
* private medical insurance - no tax relief
* Saving schemes
57
What documents is an emplyer supposed to provide as part of the payroll process ? p121
* Payslip
* P45
* P60
* P11D
58
What is a payslip ? P121
* Net pay calculated
* layout not defined by law
59
When must a payslip be provided and what format can this be in ? P122
* On / before payday
* physical copy/ electronically
60
What must a payslip show ? P122
* Gross amount - before deductuons
* Deduction - fixed and variable - purpose
* net amount
* number of hours worked
61
What must empoyers issue an employee, once the employee has left the role ? P122
P45
62
What does the P45 do ? P122
* Summarises information - employee and pay to date
* HMRC informed online - final payment
* handed - date of termination
* handed - date of final payment (employee's agreement)
63
What are the three parts of the P45 ? P123
Part 1 - Employee's copy
2 - new employer copy
3 - completed by new employer
64
What does part 3 of the P45 contain ? P123
* Bottom section
* employer's name - reference, name , and address
* new employee's details - payroll records
* online submission to HMRC - first payment
65
When is the the HMRC advised of the employee leaving a business ? P123
Final payroll info submission - online
66
Does a P45 include any details of NIC? P123
No
67
What is a P60 ? P125
* Tax paid tax year
* more than one job = more than one P60
68
When must the employer give the employee the P60 ? P125
* Working 5th April
* P60 on 31st May - paper / electronically
69
What is the P60 primarily needed for ? P125
* How much tax on salary
* claim back - overpaid tax
* apply 4 tax credits
* proof of income - loan / mortgage
*
70
What is the P11D used for ? P125
* Benefits employee receives
* e.g. company car and health insurance
* increase employee's taxable pay
71
Who submits the P11D and when are these submitted ? P125
* Employer
* 6th July after end of tax year
* part of employee's pay - employer's pay Class 1A NIC
* provided to employee - 6th July
* Employer's pay by 22nd July
72
What does FPS tell the HMRC ? P128
* Payment and deductions to employees
73
What should the final payment submission (FPS) include ? P128
* Everyone who has been paid
* submitted on / before payday
74
When must the FPS be submitted to HMRC? p128
* Before the employees' payday
* Inc usual date - ignore bank holiday etc
* not too early - correct FPS changes in info e.g. tax code change
* FPS in new tax year (6th April) - not before March
75
How must the FPS be completed ? P128
* PAYE reference and account office reference entered - payroll system
* insturctions on completion
76
What can the employer do in the following tax month after the FPS has been submitted ? P129
* Log into HMRC account - view FPS
* 12th of Month - how much tax and national insurance owes HMRC
77
When does the employer payment summary need to be submitted , to apply for any reduction on the FPS amount owed ? P129
* 19th following month
* e.g. statutory sick pay, employment allowance
78
What should an employer send if its not paid any of it's employees in the tax month ? P129
* Employer payment summary
* not full payment submission
79
What are the three main penalties that can be incurred for payroll ? P131
* Late submission - payroll filings
* Inaccuracies in payroll
* late monthly payment
80
What are the two types of pentalies for later submission / non filing of an FPS/ EPS ? P130
* A monthly penalty
* An estimate of any amount due to HMRC
81
What is a monthly penalty fine for late submission of payroll filings
? P130
* number of employees
* No penalty - first month each tax year filing default
* 11 penalties per tax year
82
What is the monthly penalty for an employer with 1 to 9 employees relating to late submission of payroll flings ? P130
£100
83
What is the monthly penalty for an emplyer with 10 to 49 employees relating to late submission of payroll filings ? P130
£200
84
What is the monthly payment fine for an employer wiht 50 to 249 employees relating to late submission of payroll filings ? P130
£300
85
What is the monthly payment for an employer with 250 or more for late submission of payroll filings ? P130
£400
86
What is an estimate of any amount due to the HMRC in relation to late submissions of payroll filings ? P130
Estiamte = previous submissions + interests
87
How does the HMRC issue penalty notices for late submissions of payroll filings ? P130
* Quarterly filing penalty notice
* penalty notice - filing penalty amount - each tax month in quarter
* additional penalties - returns over three months late
88
When are penalties not applied for late submission of payroll reports **NOT** payments? P130
* FPS late - three days of employees' payday - irregular
* new employer- first FPS late - 30 days of employee pay
* employer - first in tax year
89
When are penalties incurred for inaccuries within the payroll fillings? P131
* careless
* Deliberate
* deliberate and concealed
90
What will the level of the pnealty for inaccuries be affected by ? P131
* Disclosure unprompted
* Prompted
91
What can an employer be charged with for inaccuracies within payroll filings ? P131
Penalty - Percentage of potential loss of revenue (PLR)
92
What are the percentages incurred for careless behaviour resulting in inaccuracies in payroll filings ? P131
* Unprompted - 0 to 30 %
* Prompted - 15 to 30 %
93
What are the percentages incurred for deliberate inaccuracies ? P131
* Unprompted disclosure - 20 ot 70 %
* Prompted disclosure - 35 to 70 %
94
What are the percentages for deliberate and concealed inaccuracies ? P131
* Unprompted disclosure - 30 to 100 %
* Prompted disclosure - 50 to 100 %
95
How often are employee's pay, Employer NICs, and student loans paid over to the HMRC? p131
* Monthly basis
* frequency of the payroll = irrevalent
96
What report must be used to pay tax and NIC to the HMRC ? p131
* full payment submission (**previous** tax month) - employer payment summary deductions (before 19th **current** submission)
* electronic pay 22nd/ 19th post - **each** month
97
How would an employer go about submitting FPS and EPS, besides making payment to the supplier, with a pay day of 25/09/24. P129
* Tax month - 06/09/24 to 05/10/24
* FPS - on/ before 25/09/24
* EPS- by 19/10/24
* payment - 22/10/24 electronically / 19/10/24 by post
98
How can an employer paying less than £1,500 a month to pay the HMRC ? P132
* Quarterly , not monthly
* contact HMRC -eligibility
99
What happens if a payment is late or missed ? P132
* HMRC penalties
* number of defaults
100
What is the penalty percentage applied to 1 to 3 defaults of payroll payments in their respective tax months ? P132
1 %
101
What is the penalty percentage applied to 4 to 6 defaults of payroll payments in their relevant tax months ? P132
2 %
102
What is the penalty percentage applied for 7 to 9 defaults of payroll payments in their relevant tax months ? P132
3 %
103
What is the penalty percentage applied for 10 or more defaults of payroll payments in their relevant tax months ? P132
4 %
104
How does the HMRC send out filing penalty notices ? p130
* Quarterly
* filing penalty amount = each tax month in quarter
* July, October, January , April
* July :
* month 1 - 6 April to 5 May
* month 2 6th May - 5th June
* month 3 - 6th June - 5th July
105
How do additional penalties apply for late monthly / quarterly payroll payments ? P132
* Monthly/ quarterly - 6 months = 5 %
* Monthly/ quarterly - 12 months = total 10 %
* one payment late
106
What does the paye settlement agreement allow ? P133
* One annual payment - tax and NIC
* minor/ irregular beneifts
107
What are some examples of minor beneifts/ expenses ? P133
* incentive awards
* telephone bills
* vouchers
* staff entertainment
* small non business expenses - over £5 limit UK / £10 abroad
108
What are some examples of irregular benefits nad expenses ? P133
* irregular - course of tax year E.G. Staff outing
* no payroll
* not include year -end P11D forms
* not pay Class 1A NICs - will Class 1B National (PSA)
109
When is the deadline for applying for PSA ?P133
* 5th July - following first tax year
* e.g. 6th April 2023 - 5th April 2024 = 5th July 2024
* expenses in category
110
When must any tax and national insurance owed under PSA be paid ? P133
* 22nd October - follows tax year which PSA applies
* 19th = payment by posts
111
When do employers need to make payments for amounts due annually/ occasionally ? P133
* Penalty date
* penalty date = day after due date of payment
* NIC on beneifts = 30 days after due date
112
What type of penalties will employers have to pay to late amounts due annually / occasionally ? P133
* 5 % = not within 30 days
* additional 5 % = not within 6 months
* further 5 % = not within 12 months
113
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