Tax Processes - Chapter 5 - Principles of Payroll Flashcards
When must an employer register?
Before the first payday but no more than 2 months after they start to pay
What is the benefit of using online payroll software?
Can produce Real Time Information (RTI) for HMRC
What is a requirement for payroll software?
It has to be tested and recognised by HMRC to make sure the software does what is required
What is the first day of the tax year?
6th April
What is some of the data required by HMRC?
- What employees are paid with deductions
- Details of employee leave and sickness
- Tax code notices
How long must employees keep records for?
At least 3 years after the end of the tax year they relate to. Most keep them for 6 however
What is the penalty for failure to maintain payroll records?
£3,000
What must employers keep to when holding employee data?
General Data Protection Regulations (GDPR)
What’s the difference between gross, taxable and net pay?
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
What’s the difference between statutory and non-statutory deductions?
For statutory deductions an employee does not have to give written authorisation
What are some statutory deductions?
- PAYE
- National Insurance contributions NICs
- Student loans
- Pensions
What are some non-statutory deductions?
- Charitable giving
- Union membership fees
- Private medical insurance
- Savings schemes
What are examples of forms the employer might have to issue?
- Payslip
- P45
- P60
- P11D
What is a Full Payment Submission?
This tells HMRC about payments employers made to employees and any deductions made. This should be sent on or before payday
If the FPS is not filed on time what could the penalty be?
No of employees. Monthly penalty
1-9. £100
10-49. £200
50-249. £300
250 or more. £400
When might penalties not apply for a late FPS payment?
- 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
On what date must employers pay tax and national insurance on FPS to HMRC?
22nd of each month
What should an employer do if they have not paid any employees in the tax month?
Submit an Employer Payment Summary (EPS). Can claim for employment allowance
When does an EPS need to be submitted by?
19th of the following tax month
What does a P60 show?
The tax an employee has paid in a tax year
What does a P11D show?
Shows expenses or benefits that the employee has received
What should be included on the FPS?
- Everyone who is paid
- Any deductions made
When should employers pay what they owe to HMRC?
By 22nd of each month, 19th if payment by post
What does PSA stand for?
PAYE Settlement Agreement
What is a PSA?
This allows the employer to make one annual payment to cover all the tax and National Insurance on minor, irregular or impracticable expenses
When might penalties apply for an FPS?
- If it was late
- Expected amount of FPS’s were not filed
- an EPS was not filed
What would repeated lateness of payment to HMRC under payroll?
A payroll audit could be performed which is thorough and inconvenient.
