A PAYE Settlement Agreement (PSA) allows an employer to make one annual payment to HMRC to cover all the tax and National Insurance due on minor or irregular expenses or benefits for their employees, as well as those where it would be “impracticable” to allocate specific amounts of value to individuals.
A PSA needs to be agreed with HMRC and under a newly-launched service, from 6 April 2023 this can now be done online, by either the employer or their agent. Employers and agents can also use the online service to amend or cancel an existing PSA.
When going online, the employer PAYE reference is needed, which will be in the format (for example) 123/AB456. This refence will be included on letters from HMRC about PAYE. Contact details for the business are also required.
The deadline for applying for a PSA is 5 July following the end of first tax year it applies to. If the employer applies for a PSA prior to the tax year, it can cover anything that’s included in the agreement. It’s possible to apply after the start of a tax year, but some items may not be able to be included and will need to go on a form P11D instead.
Any tax and class 1B NIC owed under a PSA must be paid by 22 October after the tax year that the PSA applies to (19 October if paying by cheque).
DSG offers a full payroll processing and advice service and we will also be happy to assist with PSA applications.
The online application service is available here: https://tax.service.gov.uk/submissions/new-form/apply-amend-cancel-paye-settlement-agreement