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agreement. Sign and return both copies; HMRC will then authorise your request and return the form – this is your PSA agreement. Any items not included in a PSA must be reported separately via a P11D or processed through payroll. Criteria for inclusion Only items that are minor, irregular or impracticable should be included in a PSA. Minor Low-value benefits. Employers must use their discretion. See PSA1060 8 . Irregular Not part of regular earnings and seen as infrequent. See PSA1070 9 . Impracticable Difficult to attribute to individual employees for a shared benefit if given to a group of employees. See PSA1080 10 . If benefits are agreed under your P626 approval notice, you don’t need to report them separately on a P11D. Trivial benefits If a benefit is exempt as trivial, it need not be included in a PSA or reported on a P11D, as the amount of the taxable benefit is so trivial it isn’t worth pursuing. See PSA1090 11 . Calculating the liability For taxable BiKs, employees would normally pay income tax on the cash equivalent value. Under a PSA, the employer pays this liability instead. When HMRC receives your PSA calculation, it will send you a payslip. Include the charge reference when making the payment. If you haven’t received a payslip,
use the SAFE reference number provided with your P626 or call the employer helpline. You won’t see this liability on your online HMRC account. Payment deadline 22 October (if paying electronically) following the end of the tax year. Calculation submission deadline HMRC recommends PSA calculations are sent to them by 31 July. Compliance and record-keeping If no PSA is required, HMRC expects a nil return. Late payment of the income tax liability and Class 1B NICs may result in penalties and interest. See PSA1180 12 , as HMRC may issue determinations based on estimated income tax liability and Class 1B NICs due. These can be higher than the employer’s actual calculation. The HMRC Agent Update 130 13 recently reminded agents of this risk. Employers must keep records relating to PSAs for at least three years after the end of the relevant tax year. See PSA1120 14 . Employers should use the official PSA1 form for all submissions and maintain detailed records for at least three years after the relevant tax year. PSA1 calculations sent by post will take longer to process, and HMRC has a strong preference for online submissions. If further guidance for compliance is needed, the GfC1 15 can be reviewed. Final thoughts The CIPP’s Advisory Service Team frequently receives queries about what items can be included in a PSA. While employers may wish to settle income tax liability and Class
1B NICs, HMRC approval should always be obtained in advance. If a benefit isn’t approved under your PSA, it must be reported via the P11D process – including any necessary amendments to your P11D(b) submission. If you’re unsure of what’s on your P626 agreement, you can check the employer compliance system screen. Refer to PSA6015 16 to view any applied, rejected or amended information. n If in any doubt, please contact the Advisory Service for further clarification: Phone: 0121 712 1099 Email: Advisoryservice@cipp.org.uk. Links corner 1. ITEPA 2003 Part 11: https://ow.ly/ F3to50WTKr9 2. Income Tax (Pay As You Earn) Regulations 2003, Regulation 105: https://ow.ly/epp150WTKyP 3. Social Security Contributions and Benefits Act 1992 Section 10A: https:// ow.ly/ZvSR50WTKBH 4. PSAs: https://ow.ly/U8XM50WTKEm 5. PSA1050: https://ow.ly/v68R50WTKG6 6. PSA1160: https://ow.ly/CZ0r50WTKKZ 7. PSA1170: https://ow.ly/1zxP50WTKM4 8. PSA1060: https://ow.ly/Kt4o50WTKPn 9. PSA1070: https://ow.ly/uxJY50WTKRc 10. PSA1080: https://ow.ly/RsCO50WTKTz 11. PSA1090: https://ow.ly/tyoQ50WTKXA. 12. PSA1180: https://ow.ly/A4Q350WTL17 13. Agent Update 130 : https://ow.ly/ WVxE50WTL1H 14. PSA1120: https://ow.ly/yV3c50WTL4x 15. Guidelines for Compliance 1: https:// ow.ly/VFkL50WTL8k 16. PSA6015: https://ow.ly/TCt950WTL9p.
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| Professional in Payroll, Pensions and Reward |
Issue 114 | October 2025
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