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Tax processes for businesses (finance act 2023) > Principles of payroll > Flashcards

Principles of payroll Flashcards

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
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2
Q

When must a person/ business register as an employer ? P109

A
  • Employ staff
  • Only employing themselves
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3
Q

When in time must a business/ person register as an employer ? P110

A
  • Before the first payday
  • Not 2 months
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4
Q

How long does it take a business to receive its PAYE reference number ? P110

A
  • 5 working days
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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
  • email
  • sole trader/ director name
  • sole trader/ director national insurance numbers
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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)
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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
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8
Q

Will the HMRC recommend payroll software ? P110

A
  • No
  • will test - paid for/ free
  • PAYE info - online/ RTI
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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

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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
    *
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11
Q

When do tax months run ? P111

A
  • 6th of one month to 5th of next
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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
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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
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14
Q

What is the fine for failing to keep payroll records ? P111

A

£3000

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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
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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
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17
Q

What regulation requires businsses to protect personal information they collect ? P113

A

General Data Protection Regulation (GDPR)

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18
Q

What law controls how personal information is used by organisations, businsses, or the governemnt ? P113

A

Data Protection Act (2018)

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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
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20
Q

How does the HMRC go about checking the PAYE records of a business ? P113

A
  • write/ phone
  • visit
  • failure = penalty
  • reasonable excuse
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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
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22
Q

What is gross pay ? P114

A
  • before deduction - e.g. N.I
  • annual amount
  • per period
  • per month
  • hourly rate
  • lump sum
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23
Q

What are additional/ alternative pay that employees may be entitleed to ? P115

A
  • Holiday pay
  • sick pay
  • maternity pay
  • paternity pay
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24
Q

What is taxable pay ? P115

A
  • Gross pay - tax free elements
  • Income tax charged
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25
Q

Is additional / alternative pay to gross pay subject to tax ? P115

A
  • Yes
  • Certain thresholds ( levels) exceeded
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26
Q

What is tax relief ? P115

A
  • voluntary deduction permission - before income tax
  • tax saved = tax relief
  • ALSO - employee contributions - company pension
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27
Q

What is payroll giving ? P115

A
  • Donations - charity
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28
Q

What is net pay ? P115

A
  • Take home pay
  • (total pay + allowances) - total deductions
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29
Q

What is a statutory deduction ? P116

A

Required by law

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30
Q

What is a non statutory deduction ? P116

A

emplyee must agree

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31
Q

What are the statutory deductions made from gross pay ? P116

A
  • Pay as you earn (PAYE)
  • National insurance contribution (NICs)
  • student loans
  • pensions
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32
Q

What is PAYE ? P116

A
  • Sytem
  • Income Tax
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33
Q

What is the amount of tax that an employee pays on their earnings determined by ? P116

A

Tax code

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34
Q

What does the number element of a tax code represent ? p116

A
  • Multiply by 10
  • Free pay
  • untaxed pay
  • employee’s personal allowance
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35
Q

What is pay over the personal allowance for tax taxed as as ? P116

A
  • basic rate percentage ( 20%)
  • > higher rate threshold = higher rate percentage ( 40%)
  • additional rate tax (45%) - above additional rate threshold
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36
Q

What does the letter in the tax code show ? P116

A
  • Number adjustment = general changes
  • avoids - new tax code notifications
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37
Q

What does the change of tax code during the tax year usually represent ? P116

A
  • Employees - paid too much / too little
  • collection / refund
  • reinstating free pay entitlement
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38
Q

When is the only time an employer can change the tax code of an employee ? P116

A
  • HMRC notification
  • from next payday
  • HMRC instruction
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39
Q

What is national insurance contributions ? p117

A
  • compulsory payments
  • state assistance - sick, unemployed , or retired, pension, job seeker’s
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40
Q

What is the type of national insurance paid by employers and employees called ? P117

A

Class 1

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41
Q

What must individuals have to be eligible for a full state pension ? P117

A
  • 35 years of wages > low earning limit for NI (£123) per week
  • employees NI contribution > £242 week
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42
Q

What does the amount of class 1 NIC deducted from an employee’s pay depend on ? P117

A
  • earning within certain bands
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43
Q

When do employers pay class 1 NIC ? P117

A

£175 per week exceeded (758 per month)
most emplyees = 13.8% pay

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44
Q

What is employment allowance ? P117

A
  • Staff recruitment
  • reduce their NIC liability
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45
Q

What makes a business/ charity eligible for employment allowance ? P117

A
  • Previous tax year
  • Employers’ class 1 national insurance Liabilities £100,000 >
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46
Q

What does employment allowance allow ? P118

A
  • 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
Q

Where is the claim for employment allowance made ? P118

A
  • Employer Payment Summary (EPS)
48
Q

How is student loan paid back? P117

A
  • Payroll at 9%
  • annual earning threshold - government
49
Q

What are pensions ? P118

A
  • 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
Q

When does automatic enrollment within pensions apply ? P118

A
  • Classified as worker
  • between aged 22 and state pension
  • at least £10,000 per year
  • work in UK
51
Q

Can an employee still join a workplace pension if they’ve not been automatically enrolled ? P119

A
  • Yes
  • employer cannot refuse
52
Q

What does the amount of payment into the pension scheme depend on ? P119

A
  • Pension scheme - employer has chosen
53
Q

11

What must be contributed into a pension scheme ? P119

A
  • Employer Minimum of 3 %
  • employee - 5%
  • total minimum contribution = 8 %
54
Q

What is included in pension scheme payments ? p119

A
  • Salary / wages
  • bonuses and commissions
  • overtime
  • statutory sick pay
  • statutory maternity , paternity, adoption pay
55
Q

When must an employer contribute to a pension, once the employee has voluntarily enrolled ? P119

A
  • More than:
  • £520 per month
  • £120 a week
  • £480 over 4 weeks
  • nothing - these amount or less
56
Q

What are examples of non statutory deductions other deductions from gross pay ? P119

A
  • charitable giving - before tax , after NIC
  • union membership fees
  • private medical insurance - no tax relief
  • Saving schemes
57
Q

What documents is an emplyer supposed to provide as part of the payroll process ? p121

A
  • Payslip
  • P45
  • P60
  • P11D
58
Q

What is a payslip ? P121

A
  • Net pay calculated
  • layout not defined by law
59
Q

When must a payslip be provided and what format can this be in ? P122

A
  • On / before payday
  • physical copy/ electronically
60
Q

What must a payslip show ? P122

A
  • Gross amount - before deductuons
  • Deduction - fixed and variable - purpose
  • net amount
  • number of hours worked
61
Q

What must empoyers issue an employee, once the employee has left the role ? P122

62
Q

What does the P45 do ? P122

A
  • 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
Q

What are the three parts of the P45 ? P123

A

Part 1 - Employee’s copy
2 - new employer copy
3 - completed by new employer

64
Q

What does part 3 of the P45 contain ? P123

A
  • Bottom section
  • employer’s name - reference, name , and address
  • new employee’s details - payroll records
  • online submission to HMRC - first payment
65
Q

When is the the HMRC advised of the employee leaving a business ? P123

A

Final payroll info submission - online

66
Q

Does a P45 include any details of NIC? P123

67
Q

What is a P60 ? P125

A
  • Tax paid tax year
  • more than one job = more than one P60
68
Q

When must the employer give the employee the P60 ? P125

A
  • Working 5th April
  • P60 on 31st May - paper / electronically
69
Q

What is the P60 primarily needed for ? P125

A
  • How much tax on salary
  • claim back - overpaid tax
  • apply 4 tax credits
  • proof of income - loan / mortgage
    *
70
Q

What is the P11D used for ? P125

A
  • Benefits employee receives
  • e.g. company car and health insurance
  • increase employee’s taxable pay
71
Q

Who submits the P11D and when are these submitted ? P125

A
  • 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
Q

What does FPS tell the HMRC ? P128

A
  • Payment and deductions to employees
73
Q

What should the final payment submission (FPS) include ? P128

A
  • Everyone who has been paid
  • submitted on / before payday
74
Q

When must the FPS be submitted to HMRC? p128

A
  • 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
Q

How must the FPS be completed ? P128

A
  • PAYE reference and account office reference entered - payroll system
  • insturctions on completion
76
Q

What can the employer do in the following tax month after the FPS has been submitted ? P129

A
  • Log into HMRC account - view FPS
  • 12th of Month - how much tax and national insurance owes HMRC
77
Q

When does the employer payment summary need to be submitted , to apply for any reduction on the FPS amount owed ? P129

A
  • 19th following month
  • e.g. statutory sick pay, employment allowance
78
Q

What should an employer send if its not paid any of it’s employees in the tax month ? P129

A
  • Employer payment summary
  • not full payment submission
79
Q

What are the three main penalties that can be incurred for payroll ? P131

A
  • Late submission - payroll filings
  • Inaccuracies in payroll
  • late monthly payment
80
Q

What are the two types of pentalies for later submission / non filing of an FPS/ EPS ? P130

A
  • A monthly penalty
  • An estimate of any amount due to HMRC
81
Q

What is a monthly penalty fine for late submission of payroll filings
? P130

A
  • number of employees
  • No penalty - first month each tax year filing default
  • 11 penalties per tax year
82
Q

What is the monthly penalty for an employer with 1 to 9 employees relating to late submission of payroll flings ? P130

83
Q

What is the monthly penalty for an emplyer with 10 to 49 employees relating to late submission of payroll filings ? P130

84
Q

What is the monthly payment fine for an employer wiht 50 to 249 employees relating to late submission of payroll filings ? P130

85
Q

What is the monthly payment for an employer with 250 or more for late submission of payroll filings ? P130

86
Q

What is an estimate of any amount due to the HMRC in relation to late submissions of payroll filings ? P130

A

Estiamte = previous submissions + interests

87
Q

How does the HMRC issue penalty notices for late submissions of payroll filings ? P130

A
  • Quarterly filing penalty notice
  • penalty notice - filing penalty amount - each tax month in quarter
  • additional penalties - returns over three months late
88
Q

When are penalties not applied for late submission of payroll reports NOT payments? P130

A
  • FPS late - three days of employees’ payday - irregular
  • new employer- first FPS late - 30 days of employee pay
  • employer - first in tax year
89
Q

When are penalties incurred for inaccuries within the payroll fillings? P131

A
  • careless
  • Deliberate
  • deliberate and concealed
90
Q

What will the level of the pnealty for inaccuries be affected by ? P131

A
  • Disclosure unprompted
  • Prompted
91
Q

What can an employer be charged with for inaccuracies within payroll filings ? P131

A

Penalty - Percentage of potential loss of revenue (PLR)

92
Q

What are the percentages incurred for careless behaviour resulting in inaccuracies in payroll filings ? P131

A
  • Unprompted - 0 to 30 %
  • Prompted - 15 to 30 %
93
Q

What are the percentages incurred for deliberate inaccuracies ? P131

A
  • Unprompted disclosure - 20 ot 70 %
  • Prompted disclosure - 35 to 70 %
94
Q

What are the percentages for deliberate and concealed inaccuracies ? P131

A
  • Unprompted disclosure - 30 to 100 %
  • Prompted disclosure - 50 to 100 %
95
Q

How often are employee’s pay, Employer NICs, and student loans paid over to the HMRC? p131

A
  • Monthly basis
  • frequency of the payroll = irrevalent
96
Q

What report must be used to pay tax and NIC to the HMRC ? p131

A
  • full payment submission (previous tax month) - employer payment summary deductions (before 19th current submission)
  • electronic pay 22nd/ 19th post - each month
97
Q

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

A
  • 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
Q

How can an employer paying less than £1,500 a month to pay the HMRC ? P132

A
  • Quarterly , not monthly
  • contact HMRC -eligibility
99
Q

What happens if a payment is late or missed ? P132

A
  • HMRC penalties
  • number of defaults
100
Q

What is the penalty percentage applied to 1 to 3 defaults of payroll payments in their respective tax months ? P132

101
Q

What is the penalty percentage applied to 4 to 6 defaults of payroll payments in their relevant tax months ? P132

102
Q

What is the penalty percentage applied for 7 to 9 defaults of payroll payments in their relevant tax months ? P132

103
Q

What is the penalty percentage applied for 10 or more defaults of payroll payments in their relevant tax months ? P132

104
Q

How does the HMRC send out filing penalty notices ? p130

A
  • 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
Q

How do additional penalties apply for late monthly / quarterly payroll payments ? P132

A
  • Monthly/ quarterly - 6 months = 5 %
  • Monthly/ quarterly - 12 months = total 10 %
  • one payment late
106
Q

What does the paye settlement agreement allow ? P133

A
  • One annual payment - tax and NIC
  • minor/ irregular beneifts
107
Q

What are some examples of minor beneifts/ expenses ? P133

A
  • incentive awards
  • telephone bills
  • vouchers
  • staff entertainment
  • small non business expenses - over £5 limit UK / £10 abroad
108
Q

What are some examples of irregular benefits nad expenses ? P133

A
  • 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
Q

When is the deadline for applying for PSA ?P133

A
  • 5th July - following first tax year
  • e.g. 6th April 2023 - 5th April 2024 = 5th July 2024
  • expenses in category
110
Q

When must any tax and national insurance owed under PSA be paid ? P133

A
  • 22nd October - follows tax year which PSA applies
  • 19th = payment by posts
111
Q

When do employers need to make payments for amounts due annually/ occasionally ? P133

A
  • Penalty date
  • penalty date = day after due date of payment
  • NIC on beneifts = 30 days after due date
112
Q

What type of penalties will employers have to pay to late amounts due annually / occasionally ? P133

A
  • 5 % = not within 30 days
  • additional 5 % = not within 6 months
  • further 5 % = not within 12 months

Tax processes for businesses (finance act 2023) (6 decks)

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