Nvq/Svq Level 2 in Payroll Administration

Payroll QualificationQuestion paperLevel 2 Certificate in Payroll Administration (QCF) Determining net pay (DNP)Thursday 3 December 2009 (morning)Time allowed - 3 hours plus 15 minutes’ reading timePlease complete the following information in BLOCK CAPITALS:Student member number Desk numberVenue code DateVenue nameImportant: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 contributionCOMP Contracted out money purchaseCOSR Contracted out salary relatedCTAEO Council tax attachment of earnings order HMRC HM Revenue & CustomsNI National insuranceNIC National insurance contributionSAP Statutory adoption paySMP Statutory maternity paySPP Statutory paternity paySSP Statutory sick payUEL Upper earnings limit IntroductionThis 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 1You 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.DataEmployee 1Name: Zac EfronAnnual salary: £48,346.00 Monthly salary: £4,028.83Deductions: AVC: £192.00 a month Private health cover: £350.50 a month Charitable giving: £150.25 a monthPension scheme member: YesApril 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.3 Note: This page is perforated. You may remove it for easy reference.Employee 2Name: Natacha LekAnnual salary: £38,500.00 Monthly salary: £3,208.33Deductions:Student loan deduction: YesPension scheme member: YesApril 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.4 Note: This page is perforated. You may remove it for easy reference.Tax, national insurance contributions (NICs) and other rates and limitsIncome tax rates:Basic rate 20% Higher rate 40%Basic rate band £1 – £34,800Allowance:Personal allowance £6,035Student 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 £770Monthly £390 £453 £3,337Yearly £4,680 £5,435 £40,040Rates:Employee’s contributionsNot 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 UELContracted 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 UELContracted out rebate: 1.6% on earnings between the LEL and ET5 Note: This page is perforated. You may remove it for easy reference.Tax, NICs and other rates and limits, continuedEmployer’s contributionsNot 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 ETContracted 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 ETSalary related pension: 9.1% on earnings between the ET and the UEL Contracted out rebate: 3.7% on earnings between the LEL and the ETBoth 12.8% on earnings above the UEL6 Insert pdf of Tables A – month 17 Insert pdf of Tables A – month 28 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 payBasic pay ______Pension contribution for April 2009 ______AVC for April 2009 ______Charitable giving for April 2009 ______Tax calculationCumulative 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 2009Employee: Zac Efron Date: 30 April 2009Payments 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:AVC:Charitable giving:Private health cover:Total gross pay: Total deductions: Net pay:NI Number: PT254109D Tax code: 582L12 Calculation for Task 1.1 – Zac Efron – May 2009 gross to net payBasic pay ______Pension contribution for May 2009 ______AVC for May 2009 ______Charitable giving for May 2009 ______Cumulatives: Pension ______AVC ______Charity ______Tax calculationCumulative gross pay to May 2009______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 to May 2009 ______Tax deducted in April 2009 ______Tax due for May 2009______NICs calculation NI table letter used______Employee’s contribution payable ____________13 ____________Employer’s contribution payable ________________________14 Payslip for May 2009Employee: Zac Efron Date: 29 May 2009Payments 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:AVC:Charitable giving:Private health cover:Total gross pay: Total deductions: Net pay:NI Number: PT254109D Tax code: 528L15 Calculation for Task 1.1 – Natacha Lek – April 2009 gross to net payBasic pay ______Pension contribution for April 2009 ______AVC for April 2009______Tax calculationCumulative 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 __________________16 ______Employer’s contribution payable ________________________Payslip for April 2009Employee: Natacha Lek Date: 30 April 2009Payments Deductions Year to date £ £ £Basic pay: Income tax: Gross pay:NIC: Pay for tax purposes:Pension: Tax:AVC: Employee’s NIC:Student loan: Employer’s NIC:Pension:AVC:Student loan:17 Total gross pay: Total deductions: Net pay:NI Number: BH398217C Tax code: 603L18 Calculation for Task 1.1 – Natacha Lek – May 2009 gross to net payBasic pay for May 2009 ______Bonus for May 2009 ______Pension contribution for May 2009 ______AVC for May 2009______Cumulatives Pension ______AVC ______Tax calculationCumulative gross pay to May 2009______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 to May 2009 ______Tax deducted in April 2009 ______Tax due for May 2009______NICs calculation NI table letter used ______Employee’s contribution payable ____________19 ____________Employer’s contribution payable ________________________20 Payslip for May 2009Employee: Natacha Lek Date: 29 May 2009Payments Deductions Year to date £ £ £Basic pay: Income tax: Gross pay:Bonus: NIC: Pay for tax purposes:Pension: Income tax:AVC: Employee’s NIC:Student loan: Employer’s NIC:Pension: AVC:Student loan:Total gross pay: Total deductions: Net pay:NI Number : BH398217C Tax code : K28121 DataYou 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 deductionsI 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 deductions22 This page is for the continuation of your email. You may not need to use all of it. 23 Section 2You 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.Task 2.1 (5 minutes)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 643L24 Task 2.2 (5 minutes)(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. 1.2.(b) Which THREE of the following would be included in the ‘Gross cost’ of the payroll?Employees’ pension contributionsEmployer’s national insurance contributionsIncome taxVATBasic salaryOvertimeCompany cars25 Task 2.3 (3 minutes)(a) Which ONE of the following describes the point at which an employee ceases to be liable for national insurance contributions? Withdraws authority to deductReaches state pension age Earnings exceed the Upper Earnings LimitShe becomes entitled to maternity pay(b) Explain the circumstances that must exist for an employee to become liable for national insurance contributions.Task 2.4 (7 minutes)(a) List THREE payroll items which must be included in the regular payment of PAYE to HMRC. 1.2.3.(b) Give TWO examples of payments which can be recovered from HMRC using the PAYE payment process. 1.2.(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 December26 Task 2.5 (5 minutes)(a) Explain what the terms Lower Earnings Limit (LEL), Earnings Threshold (ET) and Upper Earnings Limit (UEL) mean. LELETUEL(b) Describe how the terms used in 2.5(a) above affect the way national insurance contributions are calculated.Task 2.6 (4 minutes)(a) List THREE ways in which the data protection act applies to payroll. 1.2.3.(b) Give TWO examples of how you would protect employee data within your payroll department. 1.2.27 Task 2.7 (6 minutes)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. 1.2.3.(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?Task 2.8 (3 minutes)(a) To which ONE of the following organisations must charitable giving payments be made after deductions have been taken from employees’ pay?HMRCEach individual charity involvedAn approved agencyThe 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 £5.0028 Task 2.9 (4 minutes)(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%Task 2.10 (3 minutes)(a) Name TWO classes of worker who do not have a statutory right to a payslip from their employer. 1.2.(b) Which ONE of the following is the deadline for supplying a payslip to someone who is entitled to one?On or before pay dayWhen it is collectedWhen it is producedWhen it is asked for29 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 © Association of Accounting Technicians (AAT) 12.09 140 Aldersgate Street, London EC1A 4HY, UK t: 0845 863 0800 (UK) +44 (0)20 7397 3000 (non-UK) e:[email protected] w: aat.org.uk2

Nvq/Svq Level 2 in Payroll Administration

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