VAT processes Chapyer 5&6

Question 1

When should the employer register with HMRC to make their first payment to an employee?

Answer 1

Before they make their first payment but no more than 2 months before

Question 2

How long are records required to be kept regarding pay roll, what is the fine for failure of this?

Answer 2

3 years, £3,000 fine per year if records are not maintained.

Question 3

When does the tax year run from and to? When should a business ensure that their payroll is up to date on their software?

Answer 3

6th April to the 5th April.
Payroll info should be up to date from 6th april or earlier.

Question 4

When do the tax months run from and to?

Answer 4

6th of one month to 5th of the next eg:
6th September - 5th October

Question 5

What is meant by gross pay regarding payroll

Answer 5

Total amount the employer pays the employee before any deductions. Usually their annual salary divided by how many months + any bonus

Question 6

Name 3-4 Statutory deductions:

Answer 6

Income tax (PAYE)
Employees’ NIC
Student Loan
Some pension contributions

Question 7

Name a voulentary deduction:

Answer 7

Trade Union Fees

Question 8

What is taxable pay?

Answer 8

Gross pay - allowable deductions, this is the amount on which income tax is charged

Question 9

What is net pay?

Answer 9

Once all deductions have been made, the amount paid to the employee is called net pay

Question 10

Name 1 statutroy and voluntary deduction from the employer?

Answer 10

Statutory - Employers NIC (no deduction from employees pay)
Voluntary - Employers Pension Contribution

Question 11

What type of national insurance is paid by the employer and employee

Answer 11

Class 1 National Insurance

Question 12

What is Class 1A and Class 1B NIC?

Answer 12

National insurance paid on expenses and benefits that they give their employees

Question 13

What is employment allowance?

Answer 13

Its to encourage businesses to recruit more staff, HMRC will allow some employers to reduce their NIC liability if the employers NIC are under £100k from the previous tax year which will cover up to £4,000.

Question 14

What 4 things must be included on a payslip? And when should a payslip be provided to an employee?

Answer 14

The gross amount of wages
Amounts of deductions and specifics of what they are for
Net amount
Number of hours

Should be provided on or before payday

Question 15

What is a P45?

Answer 15

A form given to an employee when they leave a business. Contains a summary of their pay up to date

Question 16

What is a P60?

Answer 16

At the end of each tax year the employer must provide a P60 to each employee. Shows:
total taxable earnings
tax deducted
NI Number
Employers name and address

Question 17

When should a P60 be issued?

Answer 17

31st May following the end of the tax year

Question 18

What is a P11D form?

Answer 18

Form telling HMRC about any benefits in kind the employee has recieved. Could be a company car or gym membership.

These benefits increase employees taxable pay

Question 19

When must an employer submit a P11D form online to HMRC and give to the employees?

Answer 19

6th July after the end of the tax year to whcih they relate to

Question 20

When must an employer pay class 1A NIC?

Answer 20

22nd July if paying electronically, 19th otherwise

Question 21

When must the employer report their payroll info to HMRC?

Answer 21

The employer reports payroll info on or before any day when the employer pays someone.

Question 22

What is an FPS?

Answer 22

Full payment submission - A form including the amounts paid to employees, any deductions under PAYE such as income tax or NIC and detials of any employees which have joined/left since the last FPS.

Question 23

When should a FPS be submitted?

Answer 23

FPS should be submitted on or before payday

Question 24

What is a EPS

Answer 24

Employer Payment Summary - Submitted online if the employer has not actually paid anyone in the tax month (6th of a month to the 5th of the following month)

Question 25

What is a PAYE settlement agreement?

Answer 25

An agreement with HMRC that allows an employer to make one annual payment to cover all the tax and NIC due to ‘minor, irregular and impracticable’ expenses or benefits that are given to employees.

Question 26

When must an employer pay the their monthly payroll?

Answer 26

22nd of each month if paid electronically, 19th otherwise.

Question 27

What is the error correction threshold for the VAT return?

Answer 27

Greater than £10,000
or
1% of turnover overall limit of £50,000

Question 28

When contacting HMRC and seeking VAT legislation advice what are the steps to contact them?

Answer 28

Check website first,
Ring VAT helpline
Email or Write to HMRC

Question 29

What are the VAT officers entitled to examine/do during a visit?
What must happen before they visit?

Answer 29

Question business owner.
Examine business records,
Check VAT return is accurate
Watch business activity

Must contact the business owner in writingbefore arrival, 7 days

Question 30

What can tax legislation have an impact on?

Answer 30

Accounting systems - Have to update the rate of VAT
Change in VAT rate - increase the cost for the customer
Some VAt registered business may need to register earlier or later than expected.

Question 31

What factors whould be considered when communicating with clients?

Answer 31

Should be timely,
Advice should be accurate,
Security measures are nessasry to comply with GDPR

Question 32

What are the fundamental principles surrounding ethics?

Answer 32

Integrity - Straight forward/Honest
Objectivity - No bias/Influenced/Pressured
Professional competance
Confidentiality
Professioanl Behavouir

Question 33

Which document is the employment allowance on?

Answer 33

EPS

Question 34

when can a business pay its payroll quarterly?

Answer 34

When it’s average monthly PAYE payment is less than 1,500

Question 35

What is RTI

Answer 35

Real Time Information
Allows employers to transmit up to date info electronically to HMRC about who they employ and what they have paid their employees

Question 36

How do you work out taxable pay?

Answer 36

Gross pay - employee pension contributions