COMPLIANCE
PSAs
In payroll, there are months that are synonymous with certain deadlines. While everyone else is interested in Halloween, payroll professionals will be mindful of the upcoming deadline for pay as you earn (PAYE) settlement agreements (PSAs), in October. Here, the CIPP’s policy and research team discusses some of the key facts you need to know
What is a PSA? l a PSA allows an employer to make one annual payment to cover all tax and National Insurance (NI) which is due on minor, irregular or impracticable expenses or benefits they provide to their employees l where a PSA is in place for certain items, there’s no requirement to: m process them through payroll and calculate tax and NI m include them in end-of-year P11D forms m pay class 1A NI on them at the end of the tax year, as class 1B NI is paid as part of the PSA instead.
What is classed as minor, irregular or impracticable? l some examples of minor benefits and expenses could be: m incentive awards m small gifts and vouchers m staff entertainment. l some examples of irregular benefits and expenses could be: m relocation expenses exceeding £8,000 m use of a company holiday flat. For an expense or benefit to be irregular, it can’t be paid at regular intervals, nor can the employee have a contractual right to it. l some examples of impracticable benefits and expenses could be: m shared cars m personal care expenses. For an expense or benefit to be impracticable, it must be difficult to place a value on it, or hard to divide up between individual employees. How do you change or cancel a PSA? l to change the items included in the PSA, send the details to the office that issued it. A revised P626 will be sent by HMRC which needs to be signed and returned l to cancel a PSA, the return slip section of the P626 needs to be completed and send to HMRC. The PSA will be cancelled on the date noted on the return slip. What can’t be included on a PSA? There are certain things that categorically cannot be included on a PSA. This includes wages, high-value benefits or cash payments, such as: l bonuses l round-sum allowances l beneficial loans.
How do you get a PSA? 1. write to HM Revenue and Customs (HMRC) outlining expenses and benefits the PSA will cover 2. if it agrees on what’s to be included, HMRC will send two draft copies of form P626. Both copies need to be signed and returned to HMRC. HMRC will authorise the request and send back a form, which is the official PSA 3. anything that can’t be included on the PSA must be reported on P11Ds, unless the expense(s) and / or benefit(s) are being payrolled 4. the online PSA1 form should be completed and sent to HMRC, to advise how much is owed. If this doesn’t happen, HMRC will calculate the amount on behalf of the employer 5. HMRC will confirm the total tax and NI due prior to 19 October the following tax year. The agreement continues until either the employer or HMRC cancels or amends it – there’s no need to renew a PSA each tax year. Deadlines and payment l to apply for a PSA, the deadline is 5 July following the tax year it applies to l the deadline for payment of any tax and NI owed on the PSA is 22 October following the tax year it applies to (19 October if paid by post).
*Please note that trivial benefits shouldn’t be included on a PSA.
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| Professional in Payroll, Pensions and Reward |
Issue 76 | December 2021 – January 2022 Issue 84 | October 2022
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