PT22, 23, 24 PAYE

Question 1

What is PAYE?

Answer 1

PAYE is the system by which employers collect tax on employment income paid to their employees and pass it on to HMRC.

Question 2

What is subject to PAYE?

Answer 2

Most cash payments are subject to PAYE, but it also applies to readily convertible assets being assets tradeable on a recognised exchange or where trading arrangements exist.

Question 3

What’s the tax code for?

Answer 3

The tax code represents the personal allowances that the employee is entitled to and is reduced by benefits

The tax code can also be used to collect tax underpaid in an earlier year or collect tax on additional income

Question 4

& 23What’s the max tax?

Answer 4

The maximum amount of tax that can be collected from a payment is 50% of the payment (except where tax is being deducted in respect of a readily convertible asset)

Question 5

PAYE income must be reported electronically on an FPS when?

Answer 5

on or before the date of payment.

Question 6

The FPS includes what information?

Answer 6

• Taxable pay to date, including current payment and date of payment
• Tax deducted to date
• Tax deducted in the current period and the net pay
• Gross earnings for NIC for the current period and year to date
• Employee and employer NICs for the current period and the year to date
• Employer information ie the HMRC Office number and PAYE reference number
• Employee information ie employee’s full name, date of birth, National Insurance number or address, and payroll ID
• Pay frequency for each employee, the number of hours the employee normally expects to work in a week, and the relevant tax code

Question 7

Where payment is in the form of a readily convertible asset, when must the details must be submitted?

Answer 7

as soon as reasonably practicable after the payment is made but no later than 14 days after the end of the tax month in which the payment is made.

Question 8

When is an EPS submitted?

Answer 8

An EPS is submitted where there are no payments made to employees in a month.

The EPS is due 14 days from the end of the tax month (ie 19th of the calendar month)

Question 9

When is an EPS due?

Answer 9

The EPS is due 14 days from the end of the tax month (ie 19th of the calendar month)

Question 10

PAYE is due:

Answer 10

• 22nd of the month where payment is made electronically, or
• 19th of the month where payment is not made electronically

Question 11

When can PAYE be paid quarterly?

Answer 11

if the total tax and NICs due is less than £1,500 per month on average

Question 12

What’s a large employer?
What’s different for them?

Answer 12

(250 employees or more)
must make payments of PAYE electronically.

Question 13

When’s the P60 due?

Answer 13

31 May following end of tax year to employee

Question 14

What does a P60 show?

Answer 14

Total pay (including the value of taxable benefits included in payroll) and deductions

Question 15

When’s a P11D due?

Answer 15

6 July following end of tax year to employee and HMRC

Question 16

What does a P11D show?

Answer 16

Taxable benefits not included in payroll

Question 17

When’s a P45 completed?

Which part does the employee keep?

Which part goes to the new employer?

What info does it include?

Answer 17

Form P45 is completed when an employee leaves.

This is given to the employee who keeps Part 1A.

Parts 2 and 3 are given to the new employer.

The employee’s leaving date, pay and deductions to date and tax code are entered on the P45.

Question 18

Late payment of PAYE penalties:

Answer 18

depend on the number of defaults in the tax year:
* 1st, 2nd or 3rd default = penalty of 1% of tax and NICs paid late.
* 4th, 5th or 6th default = penalty of 2% of tax and NICs paid late.
* 7th, 8th or 9th default = penalty of 3% of tax and NICs paid late.
* 10th and subsequent defaults = penalty of 4% of tax and NICs paid late.

The first late payment of tax does not count as a default.

Question 19

Additional late payment penalty if you’re really late…

Answer 19

An additional 5% penalty will be charged if an amount is more than six months late and a further 5% again is added if it is more than 12 months late. These penalties apply to the first
late payment of tax as well.

Question 20

Late FPS filing penalties:

Answer 20

A penalty will not be charged in respect of the first month in which one or more returns are filed late.
Where a late filing penalty is charged for a month, the amount of the penalty will depend on the number of employees within the PAYE scheme:
* No more than 9 employees = £100
* 10 to 49 employees = £200
* 50 to 249 employees = £300
* 250 employees or more = £400

An additional penalty of 5% of the tax and NICs due may be charged where a return is three months late and the relevant information has not been included in a later return

Penalties can be appealed. Penalties will not be charged if there is a reasonable excuse.

Question 21

Late filing penalties – P11D

Answer 21

For late P11Ds the penalty is £300 per form and in addition HMRC can charge £60 per day for continued failure.

Question 22

For an incorrect FPS, what is the:

maximum penalty
minimum penalty with unprompted disclosure
minimum penalty with prompted disclosure

if the error was Deliberate and concealed

Answer 22

Max: 100%
min with unprompted disclosure: 30%
min with prompted disclosure: 50%

Question 23

For an incorrect FPS, what is the:

maximum penalty
minimum penalty with unprompted disclosure
minimum penalty with prompted disclosure

if the error was Deliberate bur not concealed

Answer 23

Max: 70%
min with unprompted disclosure: 20%
min with prompted disclosure: 35%

Question 24

For an incorrect FPS, what is the:

maximum penalty
minimum penalty with unprompted disclosure
minimum penalty with prompted disclosure

if the error was careless

Answer 24

Max: 30%
min with unprompted disclosure: 0%
min with prompted disclosure: 15%

Can also be suspended for 2 years

Question 25

Penalty for incorrect P11D?

Answer 25

If an incorrect P11D is filed fraudulently or negligently, a penalty of up to £3,000 per form can be levied.

Question 26

How is underpaid PAYE recovered?

Answer 26

If PAYE is operated incorrectly, any underpayment can be collected from the employer via a Regulation 80 determination. This becomes final if not appealed within 30 days.