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PAYE Settlement Agreements

What is a PAYE settlement agreement (PSA)?   

A PSA is an annual agreement made with HM Revenue & Customs (HMRC) whereby employers can settle certain tax liabilities on behalf of their employees. It can’t be used for major benefits like cars or medical insurance, but it is a way of dealing with smaller taxable benefits that would otherwise have to be returned on forms P11D and the employees would be taxed accordingly. A typical benefit that would be included in a PSA would be staff entertaining: 

  • the employer arranges for staff drinks to celebrate the business achieving a sales target. As this is staff entertaining, the costs are taxable on the employees. The employer does not want them to suffer tax on this and would prefer to settle the tax liability on their behalf. An approach to HMRC for a PSA will address the matter.
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How does it work? 

The employer notifies HMRC of the benefits to be included in a PSA. HMRC will issue two copies of a contract. The employer signs and returns these to HMRC no later than 5 July following the end of the tax year in question. Once agreed, the employer will calculate the tax and NICs on the total cost of all events (this has to be done on a grossed up basis) and send details to HMRC. A payslip will be issued to settle the liability by 19 October. 

The PSA contract is renewed annually.

The impact of a PSA 

  • Maintaining good staff morale - the employees will not suffer tax on the benefit.
  • Cashflow – the tax and NICs do not have to be paid until the 19 October of the following tax year (for example, the tax and NICs due in respect of an event held in July 2008 will not be due until 19 October 2009).
  • The tax and NICs paid by the employer can be set against the employer’s taxable profits.
  • The employer will have to pay tax on the value of the grossed up benefit, as well as NICs on the total of the value of the benefit plus the grossed up tax.

Our specialist team can offer immediate support with a confidential free initial consultation.

Why should you contact us?

We have a dedicated team who have a significant amount of experience in advising and assisting clients with the process of application, computation and submission relating to PSA Settlement Agreements. 

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David Daly

Head of National Employers' Advisory Team 

David has been involved in employment taxation for more than 35 years. He specialises in remuneration planning, devising and implementing employee share incentive schemes and advising on salary sacrifice arrangements. More   

 

Steve Livingston

Partner 

Steve is the Tax Partner in our Manchester office. Steve's main focus is on providing timely and proactive tax advice to companies and Directors throughout their business lifecycle with an emphasis on share based reward. More 

Susan Ball

Director 

Susan has over 20 years experience working extensively in the employment tax, investigations and reward field. She deals with all aspects reward planning including share schemes and salary sacrifice, as well as compliance and investigations. More 

  

Simon Warne

Partner

Simon is a Tax Partner in the Kent office. His experience includes remuneration and pension planning to avoid the higher marginal rates and advising on the Construction Industry Scheme. Simon advises on the interaction of UK employment taxes with personal and corporate tax, including international aspects and managing HM Revenue and Customs enquiries. More

 

Brian Robson 

Senior Manager  

Brian specialises in advising independent schools and not for profit organisations. His experience covers all aspects of employee taxation in particular PAYE, National Insurance and benefit-related matters. More  

 
 

Stuart Weekes

Partner

Stuart is a Tax Partner based in the Thames Valley office. He works with businesses and other organisations from a wide range of sectors and disciplines including start ups, larger privately owned businesses, corporates and not for profit organisations. Advising on and implementing all forms of management incentives, ranging from cash bonus plans to tax-efficient schemes. More

 

Colin McCullough

Tax Senior   

Colin advises businesses and not for profit organisations on all matters relating to employee taxation including payroll, P11D's, dispensations and PAYE Settlement Agreements. More 

  

Karen Goodwin

Manager 

Karen is a Manager in Cheltenham and is responsible for employment and benefit related matters including overseeing the completion of employers' end of year returns of expenses and benefits and managing the payroll department in Cheltenham office. More 

 

Andrew Learmond 

Tax Senior 

Andrew specialises in not for profit organisations, carrying out reviews of clients compliance procedures to identify areas of risk and advising on how to correct any compliance errors. More  

  

Paul Edwards

Director

Paul is a director in our Midlands Office. He has worked in tax for more than 35 years, and has wide-ranging experience of advising corporates, business owners and other individuals in tax. He has specialised in recent years, providing PAYE Health Checks, compliance and reward planning advice. More 

Please call us on 020 7842 7197 if you have any employer related queries. Alternatively complete our enquiry form and one of our specialists will contact you.

 

Contact Us
David Daly
London, UK
+44 (0)20 7842 7364