PAYE Settlement Agreement (PSA) Payment Reminder

PAYE Settlement Agreements (PSA) provide a measure of simplification for employers dealing with certain taxable benefits. A PAYE Settlement Agreement (PSA) allows employers to make one annual payment to cover all the tax and National Insurance due on small or irregular taxable expenses or benefits for your employees. https://www.gov.uk/paye-settlement-agreements

The expenses or benefits included in a PSA must be defined as one of the following;

• minor – e.g. a small birthday present
• irregular – e.g. one-off relocation expenses over £8,000 (these are tax-free below £8,000)
• impracticable (difficult to work out the value of or divide up between individual employees) – e.g. shared cars or taxi journeys

The employer can enter into a PSA with HMRC.  Examples of benefits that could be included in a PSA are:

• prizes, incentives or awards
• staff entertaining e.g. a ticket to an event or an event not otherwise covered by exemption
• gym subscriptions
• small gifts not otherwise covered by an exemption
• telephone bills   
• benefits that have been shared between a number of employees

Employers that are required to notify HMRC of the value of items included in a PAYE settlement agreement (PSA) should do so using form PSA1. The deadline for applying for a PSA for 2019-20 expired on 5 July 2020.

However, any tax or National Insurance due for 2019-20 under a PSA must be paid electronically to clear into HMRC’s bank account by 22 October 2020. Employers that pay by cheque must ensure that the payment reaches HMRC by 19 October 2020. There may be interest and / or a late payment penalty due where the payment is made late.