Payroll Qualification

Question paper

Level 2 Certificate in Payroll Administration (QCF)

Determining net pay (DNP)

Thursday 17 June 2010 (morning)

Time allowed - 3 hours plus 15 minutes’ reading time

Please complete the following information in BLOCK CAPITALS:

Student member number / Desknumber
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 must use permanent ink, preferably black, to write your answers. Correcting fluid may not be used.

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
AVCAdditional voluntary contribution
COMPContracted out money purchase
COSRContracted out salary related
CTAEOCouncil tax attachment of earnings order
HMRCHM Revenue & Customs
NINational insurance
NICNational insurance contribution
SAPStatutory adoption pay
SMPStatutory maternity pay
SPPStatutory paternity pay
SSPStatutory sick pay
UAPUpper accrual point
UELUpper earnings limit

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 page27 and the back cover, but you should include all essential calculations in your answers.

On pages5 to 8you will find all the rates and limits you need to complete the exam, includingpay adjustments, income tax and national insurance contributions (NICs) rates and limits and student loan deduction rates.

Both sections relate to the information given below.

Introduction

  • You are a payroll assistant for Fictitious Ltd.
  • The company’s main pension scheme is a COSR and contributions are paid by employees at 6.5% of all pay.
  • The company has an agreement for AVCs and employees who sign up for them have the contributions deducted from their pay.
  • All charitable giving contributions are official and are made to an agency approved by HMRC.
  • Employees who join the company leisure club have the subscriptions deducted fromtheir pay.

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.

Data

Employee 1

Donna Bellony

April 2010:

  • Donna has a salary of £4,175.00 a month and is a member of the main pension scheme.
  • She is absent on unpaid leave for half of the month so you must pay her only £2,087.50 this month.
  • You receive a notification from HMRC to apply a code of 647L from this month.
  • Her other monthly deductions are:

AVC£75.00

Leisure club£87.50

May 2010:

  • Donna’s salary returns to the full payment of £4,175.00 this month.
  • She is to be paid her annual bonus of £2,500.00 this month.
  • You receive a notification from HMRC to apply a code of BR from this month.
  • You receive an authorised instruction to start charitable giving deductions of £250.00 a month from this month.

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

Employee 2

Debjani Mukherjee

April 2010:

  • Debjani has a salary of £3,850.00 a month but only started on 19 April 2010 and is to be paid £1,750.00 this month.
  • No P45 has been produced but Debjani has completed and signed a P46. She has ticked box B on the form and the instructions on the form indicate that you must use theemergency code on a non-cumulative basis.
  • Debjani has given no authorisations for any deductions at this stage.

May 2010:

You receive a P45 from Debjani with the following information:

Date of leaving:16 April 2010

Tax code at leaving date:162L

Month number:1

Total pay to date:£1,963.46

Total tax to date:£ 365.40

Student loan deductions:Y

Debjani has authorised the following deductions to be taken from her pay starting this month:

A one-off donation to a local guide dogs association£150.00

Leisure club£65.00 a month

Pension schemeYes

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

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

Income tax rates:

Basic rate20%

Higher rate40%

Basic rate band£1 – £37,400

Allowance:

Personal allowance£6,475

Student loan deductions:

Threshold£15,000

Rate9%

National insurance contributions:

Limits and thresholds:

Pay frequency / Lower earnings
limit(LEL) / Earnings threshold(ET) / Upper accrual point(UAP) / Upper earnings limit(UEL)
Weekly / £95 / £110 / £770 / £844
Monthly / £412 / £476 / £3,337 / £3,656
Yearly / £4,940 / £5,715 / £40,040 / £43,875

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 UAP

11% on earnings between the UAP and the UEL

1% on earnings above the UEL

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

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

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 UAP

Contracted out rebate:1.4% on earnings between the LEL and ET

Salary related pension:9.1% on earnings between the ET and the UAP

Contracted out rebate:3.7% on earnings between the LEL and the ET

Both12.8% on earnings above the UAP

Small employer relief limit£45,000 a year

For HMRC’s Tables A, please see Adobe (pdf) version of exam paper.

For HMRC’s Tables A, please see Adobe (pdf) version of exam paper.
Task 1.1(120 minutes)

(a)Using all the information given, calculate Donna Bellony’s and Debjani Mukherjee’s net pay for April and May 2010 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 Donna and Debjani for April and May 2010 on pages 11, 13, 15 and 17.

Notes:

Your calculations should be based on the values,pay adjustments, rates and limits supplied to you on pages 5 to 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 usedexceeds 500.

Calculation for Task 1.1 –Donna Bellony – April 2010 gross to net pay

Basic pay ______

Pension contribution for April 2010 ______

AVC for April 2010______

Tax calculation

Cumulative gross pay______

Less cumulative allowable deductions______

Cumulative pay for tax purposes ______

Tax code used ______Tax basis ______

Adjustment for tax code ______

Cumulative net taxable pay ______

Tax calculation

______

______

______

Tax due for April 2010 ______

NICs calculationNI letter used______

Employee’s contributionpayable______

______

______

______

Employer’s contribution payable______

______

______

______
Payslip for April 2010

Employee: Donna Bellony Date: 30 April 2010

Payments
£ / Deductions
£ / Year to date
£
Basic pay: / Income tax: / Gross pay:
NIC: / Pay for tax purposes:
Pension: / Income tax:
AVC: / Employee’s NIC:
Leisure club: / Employer’s NIC:
Pension:
AVC:
Leisure club:
Total gross pay: / Total deductions: / Net pay:

NI Number: TP205169ATax code:

Calculation for Task 1.1 – Donna Bellony – May 2010 gross to net pay

Basic pay ______

Annual bonus ______

Pension contribution for May 2010______

AVC for May 2010 ______

Charitable giving for May 2010 ______

Cumulatives: Pension ______AVC ______Charity ______

Tax calculation

Cumulative gross pay to May 2010 ______

Less cumulative allowable deductions ______

Cumulative pay for tax purposes ______

Tax code used ______Tax basis______

Adjustment for tax code ______

Cumulative net taxable pay ______

Tax calculation

______

______

______

Tax due to May 2010 ______

Tax deducted in April 2010______

Tax due for May 2010______

NICs calculationNI letter used______

Employee’s contribution payable______

______

______

______

Employer’s contribution payable______

______

______

______

Payslip for May 2010

Employee: Donna Bellony Date: 28 May 2010

Payments
£ / Deductions
£ / Year to date
£
Basic pay: / Income tax: / Gross pay:
Annual bonus: / NIC: / Pay for tax purposes:
Pension: / Income tax:
AVC: / Employee’s NIC:
Charitable giving: / Employer’s NIC:
Leisure club: / Pension:
AVC:
Charitable giving:
Leisure club:
Total gross pay: / Total deductions: / Net pay:

NI Number: TP205169ATax code:

Calculation for Task 1.1 – Debjani Mukherjee – April 2010 gross to net pay

Basic pay ______

Tax calculation

Cumulative gross pay______

Less cumulative allowable deductions______

Cumulative pay for tax purposes ______

Tax code used ______Tax basis ______

Adjustment for tax code ______

Cumulative net taxable pay ______

Tax calculation______

______

______

______

Tax due for April 2010 ______

NICs calculationNI letter used______

Employee’s contribution payable______

______

______

______

Employer’s contribution payable______

______

______

______

Payslip for April 2010

Employee: Debjani Mukherjee Date: 30 April 2010

Payments
£ / Deductions
£ / Year to date
£
Basic pay: / Income tax: / Gross pay:
NIC: / Pay for tax purposes:
Tax:
Employee’s NIC:
Employer’s NIC:
Total gross pay: / Total deductions: / Net pay:

NI Number: YT370249CTax code:

Calculation for Task 1.1 – Debjani Mukherjee – May 2010 gross to net pay

Basic pay for May 2010 ______

Pension contribution for May 2010______

Cumulative gross pay to May 2010 ______

Less cumulative allowable deductions ______

Gross taxable pay______

Pay from previous employer______

Cumulative pay for tax purposes ______

Tax code used ______Tax basis ______

Adjustment for tax code ______

Cumulative net taxable pay ______

Tax calculation ______

______

______

Tax due to May 2010 ______

Tax deducted in April 2010______

Tax deducted by previous employer______

Tax due for May 2010______

NICs calculationNI letter used______

Employee’s contribution payable ______

______

______

______

Employer’s contribution payable______

______

______

______

Payslip for May 2010

Employee: Debjani Mukherjee Date: 28 May 2010

Payments
£ / Deductions
£ / Year to date
£
Basic pay: / Income tax: / Gross pay:
NIC: / Pay for tax purposes:
Pension: / Income tax:
Leisure club: / Employee’s NIC:
Student loan: / Employer’s NIC:
Guide dogs: / Pension:
Leisure club:
Student loan:
Guide dogs:
Total gross pay: / Total deductions: / Net pay:

NI Number: YT370249CTax code:

Data

You have the following information from the April payroll run.

Pay elements:Salary218,914.87

Commissions 73,290.93

Expenses claimed 21,723.41

Statutory maternity pay 6,418.94

Statutory paternity pay 984.48

Statutory sick pay 854.82

Deductions:Income tax 43,070.61

NIC 32,775.72

Pension contributions 16,189.97

Student loan deductions 6,253.00

AVC contributions 1,354.00

Charitable giving 6,812.00

Loans 2,873.50

Trades union 794.25

Leisure club 1,275.00

Others 11,418.73

Employer’s:NICs 38,321.94

Pension contributions 17,475.19

Task 1.2(15 minutes)

From the information provided above, and usingtheschedule on page 19, calculate thefollowing:

(a)April’s total gross payroll cost

(b)The total payment to be made to HMRC.Show the net income tax and net NIC values in your answer.

Note:

You must show your workings.

(a)April’s total gross payroll cost
(b)The total payment to be made to HMRC
(i)Net income tax value
(ii)Net NIC value
(iii)Payment due for April

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.

Task 2.1(4 minutes)

Jed has paid off his student loan and instructs you to stop taking deductions from his pay with immediate effect.

(a)Will you stop the deductions as instructed?

YESNO

(b)Explainyour answer to (a) above.

(c)Give ONE reason why you would cease taking student loan deductions from an employee’s pay.

Task 2.2(4 minutes)

The Chief Executive part owns a local travel company and instructs you to supply employees’ names and home addresses to thetravel company for marketing purposes.

(a)Will you supply the information as instructed?

YesNo

(b)Give ONE reason for your answer in (a) above.

(c) The Chief Executive’s wife sends in details of a savings account and instructs you to split her husband’s net pay, sending half of it to this second account. Which one of the following statements best describes how you would respond to this instruction?

Implement it because it is a clear instruction
Send it to theChief Executive and ask for confirmation
Implement it because it comes from theChief Executive’s wife

Task 2.3(4 minutes)

You receive a list of employees from the HR Director with an instruction to deduct £35 from each person fortheir contribution to thesummer dance.

(a)Will you action the deductions as instructed?

YESNO

(b)Which ONE of the following best explainsyour answer to (a) above.

The HR Director’s instructions must be implemented.
The list needs each employee’s signature.
It seems reasonable to ensure each person pays.
The list needs the Chief Executive’s endorsement.

(c)State TWO examples of deductions thatare lawful.

1.
2.

Task 2.4(4 minutes)

(a)Whatmust an employer have in order that a woman employee can pay reduced rate NICs?

(b)Which ONE of the following NIC categories will apply if an employee is a member of a COMP pension scheme and is over state pension age?

ACDFL

(c) Which ONE of the following NIC categories will apply if an employee is under 21 and is paying into a stakeholder pension scheme?

ABGLS

Task 2.5(4 minutes)

(a)Which ONE of the following describes the purpose of form P46?

Statement of Student Loan Deduction
Employee without a Form P45
Deductions working sheet
Day to Day Payroll Helpbook

(b)State THREE things that are included in the general notice to change tax codes after a budget announcement.

1.
2.
3.

Task 2.6(5 minutes)

HMRC is continuing its programme of modernising the PAYE process and making online submission and filing of documentation mandatory for employers.

(a)State TWO forms which must now be filed online during the tax year for certain categories of employer.

1.
2.

(b)Which ONE category of employer may still submit paper forms during the tax year?

Only those who apply to do so
Only those who do payroll manually
Only those employers with less than 50 staff
Only those who have not registered as employers

(c)Which ONE of the following describes when a form P46 must be submitted?

As soon as it is completed by the employee’s manager
When HMRC submits a request for it
After the first salary payment is made to the employee
When the first PAYE payment is made to HMRC

Task 2.7(4 minutes)

Employers have a statutory requirement to supply employees with itemised payslips.

(a)When must the payslip be given to the employee?

On or before the contractual pay day
The day that they ask for the payslip
The day after the payroll run is completed
As soon as the payroll reconciliations balance

(b)To comply with employment law, state THREE items which must be shown on a payslip.

1.
2.
3.

Task 2.8(5 minutes)

(a)Arethe following statutory or voluntary deductions? Show your answer with a tick.

Statutory / Voluntary
Stakeholder pension contributions
Council tax attachment of earnings order
Income tax
Occupational pension contributions
Trades union subscription
Student loan deductions

(b)State TWO requirements that apply to charitable donations in order for them to qualify for tax relief.

1.
2.

Task 2.9(5 minutes)

Answer the following questions concerning NICs.

(a)Which ONE of the following best describes the purpose of the National Insurance number?

A special account for benefits purposes
A code to determine the amount of contributions due
An account for the employer’s tax records
A code representing the NI record for the employee

(b)Which ONE of the following is primarily responsible for obtaining a valid NInumber?

Employee
Employer

Task 2.10(6 minutes)

Payroll sectionsmust carry outvarious checks to validate the accuracy and completeness of the payroll run.

(a)Describe how you would check that the correct number of employees has been paid.

(b)What TWO measures would you use to ensure payments are made to genuine employees?

1.
2.

(c)State TWO other checks you might carry out.

1.
2.
Note:
You may use this page for your workings.

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QCF qualification codes

Level 2 Certificate in Payroll Administration (QCF) – 50042701

Unit number (DNP) – J/101/8087

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140 Aldersgate Street, LondonEC1A 4HY, UK

t: 0845 863 0800 (UK)+44 (0)20 7397 3000 (non-UK)

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