VAT processes Chapyer 5&6 Flashcards
When should the employer register with HMRC to make their first payment to an employee?
Before they make their first payment but no more than 2 months before
How long are records required to be kept regarding pay roll, what is the fine for failure of this?
3 years, £3,000 fine per year if records are not maintained.
When does the tax year run from and to? When should a business ensure that their payroll is up to date on their software?
6th April to the 5th April.
Payroll info should be up to date from 6th april or earlier.
When do the tax months run from and to?
6th of one month to 5th of the next eg:
6th September - 5th October
What is meant by gross pay regarding payroll
Total amount the employer pays the employee before any deductions. Usually their annual salary divided by how many months + any bonus
Name 3-4 Statutory deductions:
Income tax (PAYE)
Employees’ NIC
Student Loan
Some pension contributions
Name a voulentary deduction:
Trade Union Fees
What is taxable pay?
Gross pay - allowable deductions, this is the amount on which income tax is charged
What is net pay?
Once all deductions have been made, the amount paid to the employee is called net pay
Name 1 statutroy and voluntary deduction from the employer?
Statutory - Employers NIC (no deduction from employees pay)
Voluntary - Employers Pension Contribution
What type of national insurance is paid by the employer and employee
Class 1 National Insurance
What is Class 1A and Class 1B NIC?
National insurance paid on expenses and benefits that they give their employees
What is employment allowance?
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.
What 4 things must be included on a payslip? And when should a payslip be provided to an employee?
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
What is a P45?
A form given to an employee when they leave a business. Contains a summary of their pay up to date
What is a P60?
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
When should a P60 be issued?
31st May following the end of the tax year
What is a P11D form?
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
When must an employer submit a P11D form online to HMRC and give to the employees?
6th July after the end of the tax year to whcih they relate to
When must an employer pay class 1A NIC?
22nd July if paying electronically, 19th otherwise
When must the employer report their payroll info to HMRC?
The employer reports payroll info on or before any day when the employer pays someone.
What is an FPS?
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.
When should a FPS be submitted?
FPS should be submitted on or before payday
What is a EPS
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)
What is a PAYE settlement agreement?
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.
When must an employer pay the their monthly payroll?
22nd of each month if paid electronically, 19th otherwise.
What is the error correction threshold for the VAT return?
Greater than £10,000
or
1% of turnover overall limit of £50,000
When contacting HMRC and seeking VAT legislation advice what are the steps to contact them?
Check website first,
Ring VAT helpline
Email or Write to HMRC
What are the VAT officers entitled to examine/do during a visit?
What must happen before they visit?
Question business owner.
Examine business records,
Check VAT return is accurate
Watch business activity
Must contact the business owner in writingbefore arrival, 7 days
What can tax legislation have an impact on?
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.
What factors whould be considered when communicating with clients?
Should be timely,
Advice should be accurate,
Security measures are nessasry to comply with GDPR
What are the fundamental principles surrounding ethics?
Integrity - Straight forward/Honest
Objectivity - No bias/Influenced/Pressured
Professional competance
Confidentiality
Professioanl Behavouir
Which document is the employment allowance on?
EPS
when can a business pay its payroll quarterly?
When it’s average monthly PAYE payment is less than 1,500
What is RTI
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
How do you work out taxable pay?
Gross pay - employee pension contributions
