Exam

NVQ/SVQ in Payroll Administration Level 3 Completing Year-End Procedures (CYE) 2003 Standards Friday 20 June 2008 (afternoon) Time allowed - 3 hours plus 15 minutes’ reading time Please complete the following information in BLOCK CAPITALS:

Student member number Desk number

Venue code Date

Venue name Important: This exam paper is in two sections. You should try to complete all tasks in both sections. We recommend that you use the 15 minutes’ reading time to study the exam paper fully and carefully so that you understand what to do for each task. However, you may begin to write your answers within the reading time, if you wish. We strongly recommend that you use a pen rather than a pencil. You may not use programmable calculators or dictionaries in the exam. Do NOT open this paper until instructed to do so by the Supervisor.

CYE

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Glossary of terms AVC Additional voluntary contribution COSR Contracted out salary related ET Earnings threshold (for National Insurance contributions) HMRC HM Revenue & Customs LEL Lower earnings limit NI National insurance NIC National Insurance contribution PAYE Pay as you earn SAP Statutory adoption pay SMP Statutory maternity pay SPP Statutory paternity pay SSP Statutory sick pay UEL Upper earnings limit

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Note: This page is perforated. You may remove it for easy reference. This exam paper is in TWO sections.

You must show competence in both sections. So, try to complete EVERY task in BOTH sections.

Section 1 contains 3 operational tasks and Section 2 contains 10 short answer questions. You should spend about 135 minutes on Section 1 and about 45 minutes on Section 2. There is blank space for your workings on pages 26 and 27, but you should include all essential calculations in your answers. Both sections relate to the company described below. Introduction

• You work as a Payroll Officer for Fictitious Ltd. • The pension scheme is a COSR.

• Fictitious Ltd is a small company for the purpose of statutory payments. • The company is permitted to recover the full 104.5% of any statutory adoption, maternity and

paternity pay it has paid out. • The company has a charitable giving scheme which allows employees to make donations via an

HMRC approved agency.

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Note: This page is perforated. You may remove it for easy reference. Section 1 You should spend about 135 minutes on this section. Data The table below contains an extract of some of the final payroll records for the tax year 2007/08.

Zoe Thrall Vic Juris Hansa Pancholi

Final tax code 522L K386 BR

Date of starting 13 August 2007 14 May 2007 15 October 1992

Date of leaving 18 January 2008

National insurance number MN169230A HT518590D GR145263A

£ £ £

Gross pay for year including SAP, SMP, SPP, SSP and previous employment 18,080.65 52,108.54 82,500.00

Pay from previous employment Nil 7,901.53 Nil

Pension scheme contributions 1,084.84 2,652.42 4,950.00

AVC contributions 350.00 2,250.00 Nil

Charitable giving for year Nil 875.00 3,000.00

Tax deducted for year including tax from previous employment 2,243.92 14,409.10 16,401.00

Tax in previous employment Nil 2,186.50 Nil

Earnings at the LEL (where earnings reach or exceed the LEL) 3,016 3393 4,524

Earnings between the LEL and the ET 464 522 701

Earnings between the ET and the UEL 14,600 22,221 29,615

Employee NIC in the year 1,365.01 2,261.01 3,250.32

Employer NIC in the year 1,311.45 4,315.25 8,769.6

Student loan deductions 725 Nil Nil

SSP paid in the year 217.65 Nil 290.20

SMP paid in the year Nil Nil 9,356.56

SAP paid in the year Nil Nil Nil

SPP paid in the year Nil 225.50 Nil

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Task 1.1 Using the information given on page 4, prepare the end of year returns form P14 for each employee for the tax year 2007/08. Use the P14 forms provided on pages 6, 7 and 8.

Fictitious Limited

Holmes Tower

Fulchester

Hants FU2 6GA

Basingstoke

B18 150

MN 16 92 30 A

Thrall

Zoe

F

2008

Fictitious Limited

Holmes Tower

Fulchester

Hants FU2 6GA

Basingstoke

B18 150

HT 51 85 90 D

Juris

Vic

M

2008

Fictitious Limited

Holmes Tower

Fulchester

Hants FU2 6GA

Basingstoke

B18 150

GR 14 52 63 A

Pancholi

Hansa

F

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Task 1.2 Using your completed P14 forms on pages 6, 7 and 8, complete the details in the summary section of the extract of form P35 for the tax year 2007/08, determine the final payment to be made to HMRC and show that payment in box 27. Use the form P35 on page 10.

Zoe Thrall

Hansa PancholiVic Juris

38,186 51

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Note: This page is perforated. You may remove it for easy reference. Additional data Norma Benghiat has enjoyed the following benefits in kind which you now need to take into consideration for the year end P11D reporting process for 2007/2008. 1. For part of the tax year Norma had a company car which was also available for private use. The details are as follows.

• The car is a Lexus RX400h SE-L

• The petrol engine of 3,311 cc is backed up with two emission-free, self-charging electric motors.

• The list price when new, first registered and supplied to Norma on 6 August 2007 was

£44,415.00.

• A tow-bar was fitted to the vehicle prior to Norma taking delivery. This cost £2,387.50 and was paid for by the company.

• The CO2 rating of the car is 194 g/km.

• All fuel is provided by the company using a fuel card.

• Norma made a capital payment of £9,415.00 towards the car.

2. Norma took advantage of the company private health insurance plan where the average cost per

employee is £1,250.00. In addition, Norma added cover for her family at a cost to the company of £1,750.00. Norma paid back 50% of this additional cover to the employer.

3. When Norma took delivery of her company car she also bought one of the old company cars which

were going to auction. The car had a list price of £23,450.00 when first used as a company car and its second-hand value prior to sale was £5,250.00. Norma paid £3,500.00 to the company for the car as this was the estimated auction price but she did not pay any of the £278.62 paid by the company to have the car inspected, subjected to a Vehicle and Operator Services Agency (VOSA) test, and serviced prior to delivery to her.

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Note: This page is perforated. You may remove it for easy reference. Task 1.3 (a) Calculate the benefit in kind values for 2007/2008 of the relevant items on page 11 using the

P11D Working Sheet 2 on pages 13 to 16. (b) Complete the P11D for 2007/2008 on pages 17 and 18.

Fictitious Ltd

B18/150

Norma Benghiat

D E 6 7 4 9 2 5 A123MAR

06 08 2007

Lexus RX400h SE-L

�

Fictitious Ltd

B18 / 150

F

BenghiatNorma

T R 3 8 6 5 7 1 D

Lexus RX400h SE-L

070806

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Section 2 You should spend about 45 minutes on this section. Write in the space provided, tick the appropriate box OR circle the correct answer. Do not give your answer in any other way. Task 2.1 What actions must an employer have completed by the following dates? (Choose ONE only for each date) (a) 22 April

□ Made the final, electronic, payment of PAYE to HMRC for the previous tax year □ Supplied each employee with a P60 □ Collected the non-taxable incentive payment for on line filing □ Submitted completed P14s to HMRC (b) 19 May

□ Paid class 1A NICs to HMRC □ Supplied each employee with a copy P11D □ Submitted completed P14s and P35 declaration to HMRC □ Made the final, non-electronic, payment of PAYE to HMRC for the previous tax year (c) 31 May

□ Produced copies of P11D forms □ Supplied each employee with a P60 form □ Submitted P11D forms to HMRC □ Agreed a dispensation for the previous tax year

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Task 2.2 (a) Under what circumstances would you enter Statutory Sick Pay (SSP) on an employee’s P14 return?

(b) Which ONE of the following describes the value of a statutory adoption, maternity or paternity payment which is entered on the P14?

□ The total of occupational and statutory payments made □ The net amount after the appropriate recovery has been made from HMRC □ The gross amount of the payment before recovery of 92% or 104.5% □ Only the amount paid out in the last month of the tax year (c) Describe the circumstance in which there would be a net refund of income tax in the “In this

employment” box of the P14. You may refer back to the P14s on pages 6, 7 and 8.

Task 2.3 (a) Explain why end of year NIC values for directors must be checked before completing and submitting the P14s and P35 form.

(b) Which ONE of the following statements best describes the situation an employer faces when

the P35 summary is completed just before the deadline for submission and shows an amount of PAYE to be paid?

□ A cheque has to be produced immediately □ The deadline for final payment has passed so a penalty will be due □ The employer must call the Treasury and ask for advice □ The form is submitted and payment is made on the next normal date (c) Does a paper P35 form have to be sent to HMRC when the returns have been filed online?

□ Yes □ No

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Task 2.4 What actions must an employer have completed by the following dates? (a) 6 July

□ Made the payment of class 1B NICs to HMRC □ Completed P9Ds for all company directors □ Ensured that P9D and P11D forms have been received by HMRC □ Issued copies of P60s to employees (b) 22 July

□ Supplied each employee with a P60 □ Returned amended P35 where errors were found in the original □ Agreed amendment to a PAYE settlement agreement □ Ensured that electronic payment of class 1A NICs has been made for the previous tax year (c) 19 October

□ Paid over the class 1A NICs □ Agreed all amended P11D forms □ Paid the appropriate class 1B NICs to HMRC □ Completed the online users feedback questionnaire

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Task 2.5 A new employee started on 6 October 2007 and by 5 April 2008 had been paid £8,000 and enjoyed benefits in kind totalling £450. (a) Which form would you use to report the benefits in kind?

□ P9D □ P11D □ P38A □ P38S (b) Explain your answer in (a) above.

(c) By which one of the following dates must you submit the electronic version of the form?

□ 19 May □ 22 June □ 6 July □ 19 July

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Task 2.6 Answer the following questions on the subject of staff entertaining. (a) Company employees regularly attend off-site training sessions. Explain the tax implications of providing refreshments and lunches at such events.

(b) The Payroll Manager decides to treat her staff to lunch to thank them for completing the end

of year returns within the deadlines. Assuming the company reimburses the expense, which ONE of the following statements best describes the normal tax treatment of the cost?

□ The cost is not returned, it’s a business event □ The Payroll Manager pays the tax, she received the reimbursement □ Each employee involved has a P11D with a proportion of the cost □ The company adds the tax to its next normal PAYE payment (c) Describe TWO actions which the company could take in respect of the cost of the lunch.

1.

2.

Task 2.7 (a) Which ONE of the following is the standard benefit in kind value of a van made available for

private use? £350 £500 £3,000 £3,500 (b) What adjustment can be made if the van is over four years old at the beginning of the tax year?

(c) Which ONE of the following statements best describes the definition of ‘business use’ of a

company van?

□ Use other than actual private travel □ Business use plus the occasional home to work travel □ Business use, all home to work and occasional other private use □ Business use, all home to work travel and doing the weekly shopping

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Task 2.8 (a) Which ONE of the following is the maximum, tax free, sum per mile which an employer can pay to an employee who uses their own bicycle for business journeys? Nil 5p 12p 20p (b) How is the benefit in kind value calculated on a company owned bicycle and related safety equipment which is made available to an employee for both business and personal use?

(c) Describe TWO of the circumstances in which the employer providing transport home would not be a taxable benefit in kind.

1.

2.

Task 2.9 (a) What employer liability is signified by the “1A” boxes found on the P11D?

□ Additional benefit tax □ Class 1B NICs □ Personal incidental expenses □ Class 1A NICs (b) Which ONE of the following is the form which is submitted with the P9D and P11D?

□ P9A □ P9D(b) □ P11A □ P11D(b) (c) Describe how the employer’s additional liability is calculated once the P9D/P11D process is

completed.

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Task 2.10 HMRC guidance lists the dispensation as a key time saving device in the year end process. (a) Describe what a dispensation is.

(b) State TWO items which would NOT be included in a dispensation.

1.

2.

(c) What effect does a dispensation have on expenses for a P9D employee?

□ None, expenses are not reported on P9D □ Special agreement is needed for dispensations for P9D employees □ None, all expenses are reportable for P9D employees

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Note: You may use this page for your workings.

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Note: You may use this page for your workings.

NVQ/SVQ qualification codes Payroll Administration Level 3 (2003 standards) - 100/2939/4 / G75 M23 Unit number (CYE) – Y/101/8093 © Association of Accounting Technicians (AAT) 06.08 140 Aldersgate Street, London EC1A 4HY, UK t: 0845 863 0800 (UK) +44 (0)20 7397 3000 (non-UK) e: aat@aat.org.uk w: www.aat.org.uk