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TC > 12. TC - NI and further admin matters > Flashcards

12. TC - NI and further admin matters Flashcards

1
Q

Who pays Class 1 Primary NICs?

A

E’ees aged between 16 - state retirement age

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2
Q

What are Class 1 NICs paid on?

A

Cash earnings including

  • Gross pay (e.g. salary, bonus, commission etc) before any allowable deductions
  • Payments in excess of SMRS. For NICs the mileage allowance of 44ppm only and payments below that limit are not allowable deductions
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3
Q

When can an individual end up paying too much NIC?

A

If they have 2 employments - both self employed and employed

An overpayment will then be repaid by HMRC

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4
Q

What is the earnings period for calculating Class 1 NICs?

A

Normally calculated by reference to an e’ees earnings period
i.e.
if paid weekly, calc contributions on a weekly basis
if paid monthly, calculate contributions on a monthly basis

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5
Q

When are annual limits for NIC used for the earnings period?

A

Annual limits should be used if

  • Earnings accrued evenly over the year
  • The individual is a director
  • Exam Q requires you to compare annual positions in tax planning scenario (e.g. e’ee vs self employed)
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6
Q

How are NICs for directors dealt with?

A

Regardless of when the director is paid, their earnings period is the tax year
Annuals earnings period applies to the whole TY, even if the indiv ceases to be a director during the year

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7
Q

How is the annual earnings period adjusted for directors who cease to be a director during the year?

A

It doesn’t

Still apply the annual earnings period to the whole tax year

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8
Q

What are the rates for Class 1 Primary NICs?

A

0% 0 - primary threshold
12% between primary - upper
2% above upper earnings limit

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9
Q

What are the primary and upper earnings limit thresholds ?
Weekly
Monthly
Annual

A

PT:
Weekly £166
Monthly £719
Annual £8,632

UEL
Weekly £962
Monthly £4,167
Annual £50,000

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10
Q

TYU1: Joey is paid £3,500 monthly
In Aug 2019, she is also paid a bonus of £1,000

Calc the class 1 primary liability for he TY 19/20 assuming

a. she is an e’ee
b. she is a director

A

a. E’ee Joey will pay Class 1 NICs as follows
11 months: cash earnings = £2.5k
(£3.5k - £719) x 12% = £334 x 11 = £3,671
August: cash earnings = £3.5k + £1k = £4.5k
(£4,167 - £719) x 12% = £414
(£4,500 - £4,167) x 2% = £7

Total of all = £4,092

Director:
Annual basis used
Annual earnings = £3.5k x 12 + £1k = £43k
Annual: (£43k - £8,632) x 12% = £4,124

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11
Q

What are Class 1 secondary NICs due on?

A

Same as Class 1 primary NIC

Cash earnings including

  • Gross pay (e.g. salary, bonus, commission etc) before any allowable deductions
  • Payments in excess of SMRS. For NICs the mileage allowance of 44ppm only and payments below that limit are not allowable deductions
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12
Q

What are the rates of class 1 secondary NICs for e’era of e’es over 21 and apprentices over 25

A

0% below secondary threshold

13.8% above secondary threshold

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13
Q

What are the thresholds for Class 1 secondary contributions for normal workers

A

Secondary threshold (0% below, 13.8% above)
Weekly - £166
Monthly £719
Annual £8,632

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14
Q

What is the thresholds for Class 1 secondary contributions for e’ers for e’ees under the age of 21

A

Upper secondary threshold
Weekly - £962
Monthly £4,167
Annual £50,000

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15
Q

What is the thresholds for Class 1 secondary contributions for e’ers for e’ees who are apprentices and under the age of 25

A

Upper secondary threshold
Weekly - £962
Monthly £4,167
Annual £50,000

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16
Q

TYU2: Camilla is paid £4,785 monthly by her e’er Data Ltd
Calc the class 1 secondary NICs payable by Data Ltd in relation to Camilla if
a. Camilla is 30
b. Camilla is 20
Ignore the e’ment allowance

A

Annual salary - £4,785 x 12 = £57,420

a. Aged 30
(£57,420 - £8,632) x 13.8% = £6,733

b. Aged 20
(£57,420 - £50,000) x 13.8% = £1,024

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17
Q

How does the employment allowance work?

A

Reduces total class 1 secondary NICs of most e’ers by £3k per year
Allowance per e’er (NOT e’ee)
Not available to companies with a single director and no other e’ees

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18
Q

When is the employment allowance not available?

A

Not available to companies with a single director and no other e’ees

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19
Q

When is the employment allowance not available?

A

Not available to companies with a single director and no other e’ees

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20
Q

What are the percentages due on Class 1A NICs?

A

13.8% flat rate for class 1a

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21
Q

Give an example of some earnings and benefits that are subject to Class 1 primary and secondary ?

A
  • Bonus, salary, vouchers and payments readily convertible into cash e.g. gold bars
  • Write off of a beneficial loan
  • Childcare vouchers in excess of £55/weem for BRTP, £28 for HRTP and £25 for ARTP
  • SMRS payments over 45ppm [no deduction if less than 45p received]
  • Profit element of a round sum allowance
22
Q

Give some examples of earnings and benefits that are subject to Class 1a

A
  • Car van and fuel benefits
  • Beneficial loan interest
  • Directly contracted childcare in excess of £55/week for BRTP, £28 for HRTP and £25 for ARTP
  • Pvte medical insurance and taxable benefits under the salary sacrifice scheme
23
Q

How do you generally distinguish whether earnings and benefits will be subject to Class 1A or Class 1 primary and secondary?

A

Class 1 primary and secondary = cash earnings

Class 2 = non cash earnings

24
Q

What is a PAYE settlement agreement (PSA) ?

A

Can be used by an e’er to settle any PAYE and NICs due to HMRC o certain expenses or benefits in relation to an e’ee

25
Q

What is the impact of a Class 1B contribution for e’ee and e’er?

A 
- no entries are required on e'ees P11D form (and therefore e'ee not taxed on benefits or pay class 1 primary NICs in relation to cash benefits) 
No class 1a payable by ever
26
Q

What does the e’er pay for Class 1 B contributions?

A
  • Income tax that would’ve been due by e’ee on an equivalent of exp/benefit, grossed up by the marginal rate of tax paid by that e’ee
  • Class 1B NICs on the grossed up value of these expenses/benefits
27
Q

What is the rate payable for Class 1B NICs and what is it payable on?

A

Payable by e’ers on grossed up value of earnings in a PSA at a flat rate of 13.8%

28
Q

What are the fractions used for grossing up for Class 1B contribution calcs?

A

100/80 for basic rate
100/60 for higher rate
100/55 for additional rate

29
Q

What is the apprenticeship levy?

A

Charge on large UK e’ers to fund new apprenticeships

Levy applies to e’ers with an annual pay bill of over £3m

30
Q

Who does the apprenticeship levy apply to?

A

Levy applies to e’ers with an annual pay bill of over £3m

31
Q

Who does the apprenticeship levy apply to?

A

Levy applies to e’ers with an annual pay bill of over £3m

32
Q

How much is the apprenticeship levy?

A

0.5% of the pay bill

Reduced by the annual allowance of £15,000

33
Q

How can e’ers use the apprenticeship levy?

A

Levy paying e’ers can create an account with HMRC to receive levy funds to spend on apprenticeships (e.g. to pay for Kaplan courses/ ICAEW exams)
- Fund can’t be used to pay wages/ other employment costs such as travel/subsistence

34
Q

Do self employed or employed indivs pay Class 1 NICs?

A

Employed

35
Q

Do self employed or employed indivs pay Class 2 NICs?

A

Self-Employed

36
Q

Do self employed or employed indivs pay Class 4 NICs?

A

Self-Employed

37
Q

What are Class 2 NICs?

A

Payable at £3/week if a traders taxable trading income is over the small profits threshold £6,365

38
Q

What are Class 4 NICs?

A

Payable at 9% on taxable trading income (calculated using accruals or cash basis) between £8,632 and £50,000
then 2% thereafter

39
Q

TYU4: Tim is self employed and has taxable trading income of £57,600 for y/e 30 Sept 19
For the y/e 30 Sept 2020, he anticipates taxable trading income of £64,750
Calc the class 2 and class 4 NICs payable by tim for ty 19/20

A

Class 2 = 52 x £3 = £156
Note: taxable trading income exceeds small profits threshold therefore Class 2 NIC is due

Class 4 contributions
£50k - £8,632 x 9% = £3,723
£57.6k - £50k x 2% = £152

= £3,875
Tax year 19/20
Basis period = y/e 30 Sept 19 (CYB)
taxable trading income = £57.6k

40
Q

How are NICs dealt with for sole traders as e’ers?

A

E’ers can deduct their Class 1, Class 1A and Class 1B contributions from trading profits
For ST, this will reduce the amount of income tax and Class 4 NIC payable on their profits

41
Q

What are the due dates for payments on account by the self-employed?

A

First POA = 31 Jan in tax year
Second POA = 31 july following end of TY
Balancing payment due by 31 January following the end of the TY

42
Q

What are self-employed POA based on?

A

Calculated based on 50% of the prev year’s tax payable by self assessment

43
Q

When are POA not required for self-employed individuals?

A

Not available if amount of tax paid in previous TY under SA was less than
£1,000
20% of total taxable liability

44
Q

When do you have POA for capital gains tax?

A

NEVER

45
Q

When do you have POA for Class 2 NIC

A

NEVER

46
Q

When do you have POA for self-employed indivs

A

If tax paid in prev TY was over
£1,000
20% of total taxable liability

47
Q

What does the balancing payment cover

A
  • Unpaid income tax
  • Unpaid self employed NICs
  • Capital gains tax
48
Q

When can indivs reduce their POA?

A

If an indiv believes their tax liability will be lower than in the prev TY, they can make a claim to reduce their POA

49
Q

When may a penalty be charged for reducing POA?

A

If the claim has been made negligently or fraudulently

50
Q

What is the interest charged on when the actual liability is higher than the estimate of POA when an indiv has opted to reduce it?

A

Interest is charged on the difference between the POAs actually paid and the lower of:

  • reduced POA + 50% of the balancing payment
  • Amount which would have been payable had no claim for reduction been made
51
Q

When does interest run from that is charged on over reductions of POA?

A
  • Runs from the original POA due date and the date of payment of the balance of POA (exclusive)

TC (25 decks)

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