Nvq/Svq Level 2 in Payroll Administration

Payroll Qualification

Question paper

Level 2 Certificate in Payroll Administration (QCF) Determining net pay (DNP)

Thursday 3 December 2009 (morning)

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. You should use a pen rather than a pencil.

You must not, during the exam, communicate with any other candidate or be in possession of unauthorised materials, such as pre-prepared notes, books, programmable calculators and dictionaries. Any of these actions will constitute malpractice and will result in disciplinary action. If you are in possession of unauthorised materials you must give them to the Supervisor before the start of the exam.

Do NOT open this paper until instructed to do so by the Supervisor. Glossary of terms

AVC Additional voluntary contribution

COMP Contracted out money purchase

COSR Contracted out salary related

CTAEO Council tax attachment of earnings order

HMRC HM Revenue & Customs

NI National insurance

NIC National insurance contribution

SAP Statutory adoption pay

SMP Statutory maternity pay

SPP Statutory paternity pay

SSP Statutory sick pay

UEL Upper earnings limit

Introduction

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 2 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.

On pages 5-8 you will find all the rates and limits you need to complete the exam, including income tax rates and national insurance contributions (NICs), also the relevant pay adjustment tables.

Both sections relate to the information given below.

Introduction

 You are a payroll administrator for Fictitious Ltd.

 The company’s main pension scheme is a COMP and contributions are paid by employees at 5.4% of basic pay only.

 Charitable giving contributions are made to an agency approved by HMRC.

2 Note: This page is perforated. You may remove it for easy reference.

Section 1

You should spend about 135 minutes on this section.

Against each task is the recommended time for that task, but please note that these times are guidelines only.

Employee 1

Name: Zac Efron

Annual salary: £48,346.00 Monthly salary: £4,028.83

Deductions: AVC: £192.00 a month Private health cover: £350.50 a month Charitable giving: £150.25 a month

Pension scheme member: Yes

April 2009:

You receive a notification from HMRC to apply a code of 528L from this month but you apply 582L in error.

May 2009:

You correct the code error from April 2009 by applying the correct code of 528L this month.

Zac gives you an instruction to suspend his AVC payment this month.

On 24 May 2009 Zac reaches state pension age and gives you a Certificate of Age Exception on that day.

Employee 2

Name: Natacha Lek

Annual salary: £38,500.00 Monthly salary: £3,208.33

Deductions:

Student loan deduction: Yes

Pension scheme member: Yes

April 2009:

Natacha’s tax code of 603L is to be carried forward from the previous tax year.

You receive an authorised instruction to deduct AVC of £150.00 a month from her pay starting this month.

May 2009:

You receive an instruction from HMRC to change Natacha’s tax code to K281 from this month.

Natacha is to be paid a bonus of £2,500 in addition to her pay this month.

Tax, national insurance contributions (NICs) and other rates and limits

Income tax rates:

Basic rate 20% Higher rate 40%

Basic rate band £1 – £34,800

Allowance:

Personal allowance £6,035

Student loan deductions:

Threshold £15,000 Rate 9%

National insurance contributions:

Limits and thresholds:

Lower earnings limit Earnings threshold Upper earnings limit Pay frequency (LEL) (ET) (UEL)

Weekly £90 £105 £770

Monthly £390 £453 £3,337

Yearly £4,680 £5,435 £40,040

Rates:

Employee’s contributions

Not contracted out: Nil on earnings up to and including the LEL 0% on earnings between the LEL and the ET 11% on earnings between the ET and the UEL 1% on earnings above the UEL

Contracted out: Nil on earnings up to and including the LEL 0% on earnings between the LEL and the ET 9.4% on earnings between the ET and the UEL 1% on earnings above the UEL

Contracted out rebate: 1.6% on earnings between the LEL and ET

Tax, NICs and other rates and limits, continued

Employer’s contributions

Not contracted out: Nil on earnings up to and including the LEL 0% on earnings between the LEL and the ET 12.8% on all earnings above the ET

Contracted out: Nil on earnings up to and including the LEL 0% on earnings between the LEL and the ET Money purchase pension: 11.4% on earnings between the ET and the UEL Contracted out rebate: 1.4% on earnings between the LEL and ET

Salary related pension: 9.1% on earnings between the ET and the UEL Contracted out rebate: 3.7% on earnings between the LEL and the ET

Both 12.8% on earnings above the UEL

6 Insert pdf of Tables A – month 1

7 Insert pdf of Tables A – month 2

8 Task 1.1 (120 minutes)

(a) Using all the information given, calculate Zac Efron’s and Natacha Lek’s net pay for April and May 2009 showing all the gross to net calculations. Use the calculation sheets on pages 10, 12, 14 and 16.

(b) Using the results you calculated in (a) above, complete payslips for Zac and Natacha for April and May 2009 on pages 11, 13, 15 and 17.

Notes: Your calculations should be based on the values contained in the rates and limits supplied to you on pages 5 and 6 and in the pay adjustment tables on pages 7 and 8 and these may differ from the rates and values currently in use. You are being assessed on your ability to use the rates and limits supplied, not on your ability to remember a specific year’s values.

You are reminded of the special rules which apply to the assessment of tax adjustments where the code to be used exceeds 500.

9 Calculation for Task 1.1 – Zac Efron – April 2009 gross to net pay

Basic pay ______

Pension contribution for April 2009 ______

AVC for April 2009 ______

Charitable giving for April 2009 ______

Tax calculation

Cumulative gross pay ______

Less cumulative allowable deductions (above) ______

Cumulative pay for tax purposes ______

Tax code used ______Tax basis ______

Adjustment for tax code ______

Cumulative net taxable pay ______

Tax calculation

______

Tax due for April 2009 ______

NICs calculation NI table letter used______

Employee’s contribution payable ______

______

10 Employer’s contribution payable ______

______

11 Payslip for April 2009

Employee: Zac Efron Date: 30 April 2009

Payments Deductions Year to date £ £ £

Basic pay: Income tax: Gross pay:

NIC: Pay for tax purposes:

Pension: Income tax:

AVC: Employee’s NIC:

Charitable giving: Employer’s NIC:

Private health cover: Pension:

Charitable giving:

Private health cover:

Total gross pay: Total deductions: Net pay:

NI Number: PT254109D Tax code: 582L

12 Calculation for Task 1.1 – Zac Efron – May 2009 gross to net pay

Basic pay ______

Pension contribution for May 2009 ______

AVC for May 2009 ______

Charitable giving for May 2009 ______

Cumulatives: Pension ______AVC ______Charity ______

Tax calculation

Cumulative gross pay to May 2009______

Tax calculation

______

Tax due to May 2009 ______

Tax deducted in April 2009 ______

Tax due for May 2009______

______

13 ______

______

Employer’s contribution payable ______

______

14 Payslip for May 2009

Employee: Zac Efron Date: 29 May 2009

Charitable giving: Employer’s NIC:

Private health cover: Pension:

Charitable giving:

Private health cover:

NI Number: PT254109D Tax code: 528L

15 Calculation for Task 1.1 – Natacha Lek – April 2009 gross to net pay

Basic pay ______

Pension contribution for April 2009 ______

AVC for April 2009______

Tax calculation

Cumulative gross pay ______

Tax calculation ______

______

Tax due for April 2009 ______

______

16 ______

______

Payslip for April 2009

Employee: Natacha Lek Date: 30 April 2009

Pension: Tax:

Student loan: Employer’s NIC:

Pension:

Student loan:

17 Total gross pay: Total deductions: Net pay:

NI Number: BH398217C Tax code: 603L

18 Calculation for Task 1.1 – Natacha Lek – May 2009 gross to net pay

Basic pay for May 2009 ______

Bonus for May 2009 ______

Pension contribution for May 2009 ______

AVC for May 2009______

Cumulatives Pension ______AVC ______

Tax calculation

Cumulative gross pay to May 2009______

Tax calculation ______

______

Tax due to May 2009 ______

Tax deducted in April 2009 ______

Tax due for May 2009______

NICs calculation NI table letter used ______

______

19 ______

______

20 Payslip for May 2009

Employee: Natacha Lek Date: 29 May 2009

Bonus: NIC: Pay for tax purposes:

Student loan: Employer’s NIC:

Pension:

Student loan:

NI Number : BH398217C Tax code : K281

21 Data

You have received the following email from one of the company’s employees.

From: [email protected] To: [email protected] Sent: 30 November 2009 Subject: Student loan deductions

I have finished paying off my student loan but notice that I am still having deductions taken from my pay. Perhaps you would explain to me how student loan deductions from pay work. In particular please explain the following:

1. How are you notified that student loan deductions must start? Please tell me TWO ways. 2. What pay is used to calculate the deductions? 3. How do the deductions stop? 4. If I send you my loan statement, proving that I have repaid the loan, and instruct you to stop deductions, what action would you take?

Thank you for your help in this matter.

Task 1.2 (15 minutes)

From the information given, reply to Joanne’s email.

From: [email protected] To: [email protected] Sent: 3 December 2009 Subject: Re: Student loan deductions

22 This page is for the continuation of your email. You may not need to use all of it.

23 Section 2

You should spend about 45 minutes on this section.

Against each task is the recommended time for that task, but please note that these times are guidelines only.

Write in the space provided, tick the appropriate box OR circle the correct answer. Do not give your answer in any other way.

One of the company’s employees wants you to change her tax code and produces her notification, P2, sent to her by HMRC, as evidence that the code has changed.

(a) Would you change the code using the details on the P2?

Yes No

(b) Give TWO reasons for your answer to (a) above.

(c) Which ONE of the following is the emergency code for 2008/09?

BR 543L Wk1 603L 603L Wk1 643L

(a) Give TWO examples of payroll checks you would make on the deductions for income tax and national insurance contributions to help give assurances about a payroll’s accuracy. 1.

(b) Which THREE of the following would be included in the ‘Gross cost’ of the payroll?

Employees’ pension contributions

Employer’s national insurance contributions

Income tax

Basic salary

Overtime

Company cars

(a) Which ONE of the following describes the point at which an employee ceases to be liable for national insurance contributions?

Withdraws authority to deduct

Reaches state pension age

Earnings exceed the Upper Earnings Limit

She becomes entitled to maternity pay

(b) Explain the circumstances that must exist for an employee to become liable for national insurance contributions.

(a) List THREE payroll items which must be included in the regular payment of PAYE to HMRC. 1.

(b) Give TWO examples of payments which can be recovered from HMRC using the PAYE payment process. 1.

(c) Which ONE of the following is the deadline for electronic payment of PAYE for a November payroll, where the employer is a ‘large’ employer? (Ignore weekends, bank and public holidays)

5 December 6 December 19 December 22 December 25 December

(a) Explain what the terms Lower Earnings Limit (LEL), Earnings Threshold (ET) and Upper Earnings Limit (UEL) mean. LEL

(b) Describe how the terms used in 2.5(a) above affect the way national insurance contributions are calculated.

(a) List THREE ways in which the data protection act applies to payroll. 1.

(b) Give TWO examples of how you would protect employee data within your payroll department. 1.

Court and other orders are statutory deductions operated by payroll in addition to income tax, national insurance contributions and student loan deductions.

(a) List THREE things you would expect to see on a court order to operate it correctly. 1.

(b) Which ONE of the following is the administration fee Fictitious Ltd may take for each deduction made?

Nil 50p £1 £2

(c) What action would you take in respect of a court order, if the relevant employee leaves Fictitious Ltd?

(a) To which ONE of the following organisations must charitable giving payments be made after deductions have been taken from employees’ pay?

Each individual charity involved

An approved agency

The Charities Commission

(b) What is the current maximum annual donation figure?

£2,500 £5,000 £7,500 No limit

(c) How much can the employer take per pay period as an administration fee?

Nil £1.00 £2.00 £5.00

(a) What determines how Fictitious Ltd can recover statutory adoption, maternity and paternity pay it has paid out?

(b) What determines how Fictitious Ltd can recover statutory sick pay it has paid out?

(c) Which ONE of the following is the standard recovery percentage for statutory payments?

50% 92% 100% 104½%

(a) Name TWO classes of worker who do not have a statutory right to a payslip from their employer. 1.

(b) Which ONE of the following is the deadline for supplying a payslip to someone who is entitled to one?

On or before pay day

When it is collected

When it is produced

When it is asked for

29 Note: You may use this page for your workings.

30 Note: You may use this page for your workings.

31 QCF qualification codes

Level 2 Certificate in Payroll Administration (QCF) – 50042701 Unit number (DNP) – J/101/8087