NVQ/SVQ Level 2 in Payroll Administration Determining Net Pay (DNP) (2003 standards) Thursday 16 June 2005 (afternoon) EXAMINATION Time allowed 3 hours plus 15 minutes reading time Please complete the following information in BLOCK CAPITALS. You must give your registration number below. If you do not, your paper may not be marked. AAT Registration Number Approved Assessment Centre Code Desk number... Date... Approved Assessment Centre Name... Important: This examination is in two sections. To be successful you will need to show competence in both sections. We recommend that you use the 15 minutes reading time to study the examination 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 may not use programmable calculators or dictionaries in the examination. Do NOT open this paper until instructed to do so by the Supervisor. For Assessor s use only SECTION 1 TASK 1 TOTAL SECTION 2 TASK 2.1 TASK 2.2 TASK 2.3 TASK 2.4 TASK 2.5 TASK 2.6 TASK 2.7 TASK 2.8 TASK 2.9 TASK 2.10 TOTAL AAT 154 Clerkenwell Road, London EC1R 5AD, UK Tel: +44 (0)20 7837 8600 Fax: +44 (0)20 7837 6970 SA 5016 - R DNP
GLOSSARY OF TERMS AVC COMP NI NIC PAYE P6 Additional Voluntary Contributions Contracted Out Money Purchase National Insurance National Insurance Contributions Pay As You Earn Notification of change of tax allowance code 2
This page is perforated. You may remove it for easy reference. This examination paper is in TWO sections. Section 1 Section 2 1 Operational Task 10 Short Answer Questions You have to show competence in BOTH sections. You should therefore attempt and aim to complete EVERY task in EACH section. You should spend about 130 minutes on Section 1 and about 50 minutes on Section 2. There is blank space for workings on pages 21 23, but you should include all essential workings within your answer, where appropriate. You have been provided with a booklet containing all the tables you require to complete the exam, including: the Tax calculations tables the National Insurance Contibutions tables the current Student Loan Deduction tables Both sections relate to the company described below. INTRODUCTION Your tasks all relate to a company trading as: Harris Information Systems Ltd Northwood Business Park Yateley GU17 5BK You are employed as the Payroll Clerk. Weekly paid employees are all paid on Friday. Holiday pay is equal to Basic Pay only. A day s pay is one-fifth of the weekly wage. The Company Pension Scheme is a COMP with employees contributions set at 7G%. Pensionable Pay is defined as Basic Pay plus holiday pay less unpaid leave adjustments. 3
This page is perforated. You may remove it for easy reference. SECTION 1 OPERATIONAL TASKS You should spend about 130 minutes on this section. DATA The data below is for Avril DeVismes. Employee Record Card Name: Avril DeVismes Start Date: 18 January 2000 Address: 21 Macklintock Row, Binmede, Hants SO23 5WE Weekly Wage: 450.00 Telephone: 01287 616359 Pay Frequency: Weekly NI Number: SD593286D Deductions: Charitable Giving: Social Club: 25.00 per week 5.50 per week Date of Birth: 13 July 1979 ADDITIONAL DATA Week 1 2004 A form P6 is received changing her Tax Allowance code to 298L. Overtime totalling 155.20 is to be paid to her this week. 2 days unpaid leave totalling 180.00 is to be deducted this week. Week 2 2004 Overtime totalling 163.50 is to be paid to her this week. Week 3 2004 Holiday pay for 2 weeks is to be paid in addition to her normal weekly wage. Overtime totalling 97.50 is to be paid to her this week. A further Tax Allowance code adjustment has been received changing the code to 342L. Week 6 2004 A pay rise increases Avril s basic wage to 485.50 a week starting this week. She is to receive arrears totalling 1270.00 in this week as well as her other pay. A Student Loan Start Form SL1 has been received. Deductions are to commence immediately. 4
Task 1 (a) Using all the information provided, calculate Avril DeVismes s net pay for Weeks 1, 2, 3 and 6 showing all the gross to net calculations. Use the calculation sheets provided on pages 6, 8, 10-11 and 13. (b) Using the results calculated in (a) above, complete Avril s payslips for Weeks 1, 2, 3 and 6 on pages 7, 9, 12 and 14. Note: All calculations are in the 2004/2005 tax year which began on 6 April 2004 and will use the rules, tables and rates applicable for the first part of this tax year. All of the information and documents required have been provided in the separate booklet. 5
Calculation for Task 1 Avril DeVismes Week 1 2004/2005 gross to net pay Basic pay Overtime payment Adjustment for leave deduction Total gross pay, week 1 Pension contribution for week 1 Pension contribution, year to date Charitable giving for week 1 Charitable giving, year to date Tax Calculation Tax code used Tax basis Cumulative gross pay Less cumulative allowable deductions Cumulative pay for tax purposes Adjustment for tax code Cumulative net taxable pay Tax calculation Continued Continued Cumulative tax due Less tax already paid Tax due for week 1 2004 National Insurance Contributions Calculation NI table letter used Employee s contributions payable Employer s contributions payable 6
Payslip for Week 1 2004/2005 Harris Information Systems Ltd. Pay Advice Employee Avril DeVismes Date 9 April 2004 Payments Deductions Cumulatives Basic pay: Income tax: Gross pay: Overtime: NIC: Pay for Tax Purposes: Adjustments: Pension: Tax: Charitable Giving: Employee s NIC: Social Club: Employer s NIC: Pension: Charitable Giving: Social Club: Total Gross Pay: Total Deductions: Net pay: NI Number: SD593286D Tax code: 298L 7
Calculation for Task 1 Avril DeVismes Week 2 2004/2005 gross to net pay Basic pay Overtime payment Total gross pay, week 2 Cumulative gross pay Pension contribution for week 2 Pension contribution, year to date Charitable giving for week 2 Charitable giving, year to date Tax Calculation Tax code used Tax basis Cumulative gross pay Less cumulative allowable deductions Cumulative pay for tax purposes Adjustment for tax code Cumulative net taxable pay Tax calculation Continued Continued Cumulative tax due Less tax already paid Tax due for week 2 2004 National Insurance Contributions Calculation NI table letter used Employee s contributions payable Employer s contributions payable 8
Payslip for Week 2 2004/2005 Harris Information Systems Ltd. Pay Advice Employee Avril DeVismes Date 16 April 2004 Payments Deductions Cumulatives Basic pay: Income tax: Gross pay: Overtime: NIC: Pay for Tax purposes: Pension: Tax: Charitable Giving: Employee s NIC: Social Club: Employer s NIC: Pension: Charitable Giving: Social Club: Total Gross Pay: Total Deductions: Net pay: NI Number: SD593286D Tax code: 298L 9
Calculation for Task 1 Avril DeVismes Week 3 2004/2005 gross to net pay Basic pay Overtime payment Holiday pay Total gross pay, week 3 Cumulative gross pay Pension contribution for week 3 Pension contribution, year to date Charitable giving for week 3 Charitable giving, year to date Tax Calculation Tax code used Tax basis Cumulative gross pay Less cumulative allowable deductions Cumulative pay for tax purposes Adjustment for tax code Cumulative net taxable pay Tax calculation Continued Continued Cumulative tax due Less tax already paid Tax due for week 3 2004 10
National Insurance Contributions Calculation NI table letter used Employee s contributions payable Employer s contributions payable 11
Payslip for Week 3 2004/2005 Harris Information Systems Ltd. Pay Advice Employee Avril DeVismes Date 23 April 2004 Payments Deductions Cumulatives Basic pay: Income Tax: Gross pay: Overtime: NIC: Pay for Tax purposes: Holiday pay: Pension: Tax: Charitable Giving: Employee s NIC: Social Club: Employer s NIC: Pension: Charitable Giving: Social Club: Total Gross Pay: Total Deductions: Net pay: NI Number: SD593286D Tax code: 342L 12
Calculation for Task 1 Avril DeVismes Week 6 2004/2005 gross to net pay Basic pay Arrears of pay Total gross pay, week 6 Cumulative gross pay Pension contribution for week 6 Pension contribution, year to date Charitable giving for week 6 Charitable giving, year to date Tax Calculation Tax code used Tax basis Cumulative gross pay Less cumulative allowable deductions Cumulative pay for tax purposes Adjustment for tax code Cumulative net taxable pay Tax calculation Continued Continued Cumulative tax due Less tax already paid Tax due for week 6 2004 National Insurance Contributions Calculation NI table letter used Employee s contributions payable Employer s contributions payable 13
Payslip for Week 6 2004/2005 Harris Information Systems Ltd. Pay Advice Employee Avril DeVismes Date 14 May 2004 Payments Deductions Cumulatives Basic pay: Income Tax: Gross pay: Arrears of pay: NIC: Pay for Tax purposes: Pension: Tax: Charitable Giving: Employee s NIC: Social Club: Employer s NIC: Student Loan: Pension: Charitable Giving: Social Club: Student Loan: Total Gross Pay: Total Deductions: Net pay: NI Number: SD593286D Tax code: 342L 14
SECTION 2 SHORT ANSWER QUESTIONS You should spend about 50 minutes on this Section. Write in the space provided OR circle the correct answer. Do not indicate your choice or give your answer in any other way. Answer all the questions on pages 15 19. Task 2.1 The Chief Executive wants to send a Christmas Card to every employee and asks you to supply a list of the home addresses of all employees. (a) Should you supply the list as requested? Yes No (b) Explain the reasons for your answer in (a) above. Task 2.2 The company wants to make all employees accept e-payslips, sent to them using e-mail, as soon as possible. List any 3 basic rules the company must comply with to make the payslips lawful. 1. 2. 3. 15
Task 2.3 An employee has a gross salary of 22,500 a year and is paying Pension Contributions of 7G% into the company COMP Scheme. She wants to pay an additional 150, gross and before tax, a month into the company AVC Scheme. (a) Can you agree to take the AVC contributions from her pay? Yes No (b) Explain your answer in (a) above. (c) What would be the maximum gross monthly amount of AVC permitted in this case? 125.00 140.63 155.65 Task 2.4 The amount of SAP, SMP, and SPP that an employer can recover depends on the company s total NIC payable for a full tax year being greater than or equal to 45,000. (a) How much SAP, SMP and SPP can be recovered if annual NICs are above the annual value of 45,000? 92% 95% 104G% (b) How much SAP, SMP and SPP can be recovered if annual NIC s are below the annual value of 45,000? 92% 100% 104G% 16
Task 2.5 How would the following be used in calculating the total payment to the Collector of Taxes? (a) Income Tax Added Deducted Not used (b) Child Support Agency DEO Added Deducted Not used (c) Student Loan Repayments Added Deducted Not used (d) Statutory Maternity Pay Added Deducted Not used (e) Tax Credits Added Deducted Not used Task 2.6 Payroll Giving is the term used to describe the ability to make tax efficient donations to a charity via deductions from pay. (a) To what type of organisation can the deductions be made? The Charity Approved Agency Inland Revenue (b) How often are payments made to the organisation in (a) above? Weekly Monthly Quarterly As and when (c) What annual limit is there on employee contributions to a charity? 300 600 1,200 No limit 17
Task 2.7 A Deduction from Earnings Order (DEO) is issued by the Child Support Agency to collect sums from absent parents. (a) Are the following deductions permitted when calculating the Net Earnings for the purposes of the order? Trades union subscription Yes No Pensions contributions Yes No NICs Yes No Social club payments Yes No Income Tax Yes No (b) Would SMP be included as pay when deciding if a deduction is to be made? Yes No (c) (i) An employee has a DEO for 65.00 a week with Protected Earnings of 175.00 a week. She has: Gross pay of 295.00 Income Tax of 62.50 NIC of 37.80 Pension contributions of 52.00 and Pension Scheme AVC of 25. Would you deduct? Yes No (ii) Explain your answer in (c) (i) above. 18
Task 2.8 Calculating NIC involves a number of elements that are taken into account at the time payroll is processed. (a) What is the pay figure used when calculating National Insurance Contributions? Gross Pay Gross Pay less Payroll Giving Taxable Pay (b) State three of the issues to consider when selecting the correct NIC Letter to use. 1. 2. 3. Task 2.9 One of your female employees announces that she has just celebrated her 60th birthday. She writes to you telling you she no longer has to pay National Insurance Contributions and instructs you to stop taking these deductions from her pay. What three possible pieces of evidence could be submitted by the employee to justify her instruction? 1. 2. 3. TURN OVER FOR TASK 2.10 19
Task 2.10 Payroll does not end with the transfer of net pay to employees bank accounts or the issuing of payments to the tax office and other payees. All of the values from the payroll run have to be entered promptly and accurately into the company accounts. (a) State three payroll totals that you would expect to see transferred to the company ledger. 1. 2. 3. (b) Which of the following payroll items would be included in the total staff costs? Wages Yes No Salary Yes No Statutory Maternity Pay Yes No Tax Credits Yes No Employee s Pension Contributions Yes No Employer s National Insurance Contributions Yes No 20
This page can be used for your workings. 21
This page can be used for your workings. 22
This page can be used for your workings. 23
NVQ/SVQ qualification codes Payroll Administration (2003 standards) 100/2938/2 G75 N 22 Unit number (DNP) J/101/8087 Association of Accounting Technicians 154 Clerkenwell Road, London EC1R 5AD, UK Tel: +44 (0)20 7837 8600 Fax: +44 (0)20 7837 6970 06.05