Tax Processes - Chapter 5 - Principles of Payroll

Question 1

When must an employer register?

Answer 1

Before the first payday but no more than 2 months after they start to pay

Question 2

What is the benefit of using online payroll software?

Answer 2

Can produce Real Time Information (RTI) for HMRC

Question 3

What is a requirement for payroll software?

Answer 3

It has to be tested and recognised by HMRC to make sure the software does what is required

Question 4

What is the first day of the tax year?

Answer 4

6th April

Question 5

What is some of the data required by HMRC?

Answer 5

• What employees are paid with deductions
• Details of employee leave and sickness
• Tax code notices

Question 6

How long must employees keep records for?

Answer 6

At least 3 years after the end of the tax year they relate to. Most keep them for 6 however

Question 7

What is the penalty for failure to maintain payroll records?

Answer 7

£3,000

Question 8

What must employers keep to when holding employee data?

Answer 8

General Data Protection Regulations (GDPR)

Question 9

What’s the difference between gross, taxable and net pay?

Answer 9

Gross pay is pay before deductions, taxable pay is your pay after any tax-free elements have been removed like pension contribution and net pay is what you take home

Question 10

What’s the difference between statutory and non-statutory deductions?

Answer 10

For statutory deductions an employee does not have to give written authorisation

Question 11

What are some statutory deductions?

Answer 11

• PAYE
• National Insurance contributions NICs
• Student loans
• Pensions

Question 12

What are some non-statutory deductions?

Answer 12

• Charitable giving
• Union membership fees
• Private medical insurance
• Savings schemes

Question 13

What are examples of forms the employer might have to issue?

Answer 13

• Payslip
• P45
• P60
• P11D

Question 14

What is a Full Payment Submission?

Answer 14

This tells HMRC about payments employers made to employees and any deductions made. This should be sent on or before payday

Question 15

If the FPS is not filed on time what could the penalty be?

Answer 15

No of employees. Monthly penalty
1-9. £100
10-49. £200
50-249. £300
250 or more. £400

Question 16

When might penalties not apply for a late FPS payment?

Answer 16

• If the FPS is late but is made within 3 days of payday
• Where a new employer sends their first FPS late but within 30 days
• If it’s the first failure of the tax year

Question 17

On what date must employers pay tax and national insurance on FPS to HMRC?

Answer 17

22nd of each month

Question 18

What should an employer do if they have not paid any employees in the tax month?

Answer 18

Submit an Employer Payment Summary (EPS). Can claim for employment allowance

Question 19

When does an EPS need to be submitted by?

Answer 19

19th of the following tax month

Question 20

What does a P60 show?

Answer 20

The tax an employee has paid in a tax year

Question 21

What does a P11D show?

Answer 21

Shows expenses or benefits that the employee has received

Question 22

What should be included on the FPS?

Answer 22

• Everyone who is paid
• Any deductions made

Question 23

When should employers pay what they owe to HMRC?

Answer 23

By 22nd of each month, 19th if payment by post

Question 24

What does PSA stand for?

Answer 24

PAYE Settlement Agreement

Question 25

What is a PSA?

Answer 25

This allows the employer to make one annual payment to cover all the tax and National Insurance on minor, irregular or impracticable expenses

Question 26

When might penalties apply for an FPS?

Answer 26

- If it was late - Expected amount of FPS’s were not filed - an EPS was not filed

Question 27

What would repeated lateness of payment to HMRC under payroll?

Answer 27

A payroll audit could be performed which is thorough and inconvenient.