Paye Settlement Agreements (psa)
agrees to meet an employee’s tax liability. Expenses and benefits covered by a PSAmust not be included on P11D, P9D or Self-assessment returns and the employer does not need to account for tax or Class 1 NICs. COPYRIGHT © 2021 THE CHARTERED INSTITUTE OF PAYROLL PROFESSIONALS The tax liability is calculated using ‘grossed up’ principles based on the tax rates of the employees covered by the PSA. Items, which may be covered by a PSA, are: • minor items • payments or benefits made irregularly • payments or benefits on which it is either difficult or impractical to apply PAYE. Items upon which it may prove difficult to apply PAYE may, for example, arise where a benefit is shared amongst a number of employees and it would prove difficult to apportion the value of benefits between the individual employees, or where to deduct tax from the benefit would significantly reduce the way the benefit is perceived by the employee. PAYE Settlement Agreements cannot be used for major benefits, i.e.: • provision of a company car • beneficial loans • round sum allowances (see above). Applications for a PSA are made, in writing, to HMRC, identifying the items of expense or benefit to be included in the agreement. Payment of tax, and from 6th April 1999 Class 1B NICs, due under a PSA is payable as a lump sum not later than the 22nd October after the end of the tax year. Class 1B NICs are due on the value of the benefit plus the tax calculated as part of the PSA. Where items in the PSA would normally be subject to Class 1 (e.g. vouchers) then the Class 1 charge is also added in to the settlement, as is the Class 1A where any is due on items included. A PSA must be agreed by 6th July following the tax year to which it relates. For the third party provision of benefits to employees see Taxed Awards Schemes below. Since 6th April 2017 some relaxations in the process mean that employers no longer have to agree PSAs in advance. A new digital service was to be introduced in April 2018 but this has been delayed indefinitely. New guidance has been published. FromApril 2019 employers had to implement the Welsh taxation process for PAYE. Currently the Welsh rate of Income Tax remains the same as for rUK and hence no requirement to produce a separate PSA for Welsh taxpayers. When this position changes and there is a different set of Income Tax rates for Welsh taxpayers then new arrangements will be needed for PSAs. No printing, copying or reproduction permitted. From 6th April 2016 employers must provide separate PSA computations for all Scottish taxpayers.
187
Made with FlippingBook - Online magazine maker