PAYE Settlement Agreement – deadline looming

A PAYE Settlement Agreement (PSA) allows an employer to make one annual payment to cover all the tax and National Insurance (NI) due on minor, irregular or impracticable expenses or benefits. However, the deadline for making an application for a PSA is fast approaching and after 5 July 2018, as an employer, you won’t be able to apply for a PSA for the 2017/18 tax year. Nicola Roby from CHW Small Business Accountants Bolton explains further.

The benefits of a PSA are that an employer won’t need to:

• put the benefits through the payroll to work out tax and NI
• include the benefits in the in the end of year P11D forms
• pay Class 1A NI on the benefits at the end of the tax year. Instead, the employer pays Class 1B NI as part of their PSA.

It is important to remember that employers do not need to pay tax on a benefit for an employee if all of the following apply, and therefore are not required to be part of a PSA:

• it cost you £50 or less to provide
• it isn’t cash or a cash voucher
• it isn’t a reward for their work or performance
• it isn’t in the terms of the employee’s contract.

What benefits and expenses are considered minor, irregular and impracticable?

Minor

Examples include:

• incentive awards, for example for long-service
• telephone bills
• small gifts and vouchers
• staff entertainment, for example a ticket to an event
• non-business expenses while travelling overnight on business that are over the daily limit

Irregular

Examples include:

• relocation expenses over £8,000 (these are tax-free below £8,000)
• the cost of attending overseas conferences
• expenses of a spouse accompanying an employee abroad
• use of a company holiday flat

Impracticable

Examples include:

• staff entertainment that isn’t exempt from tax or NI
• shared cars
• personal care expenses, for example hairdressing

How do I obtain a PSA?

Firstly you must write to HMRC Business Tax Operations describing the expenses and benefits you want the PSA to cover.

Once HMRC have agreed on what can be included, they’ll send you 2 draft copies of form P626. Sign and return both copies and if HMRC authorise your request they will send you back your PSA.

You’ll need to report anything that can’t be included separately via a P11D. However, you will not need to send a P11D if you’re paying employees’ expenses and benefits through your payroll.

You should use form PSA1 to help you calculate the amount you are required to pay. If you don’t, HMRC will calculate the amount and this will cost you more.

Send the completed form to HMRC as soon as possible after the end of the tax year. They’ll get in touch with you before 19 October following the tax year that the PSA covers to confirm the total tax and NI you need to pay.

How do I renew a PSA for the 2018/19 tax year?

HMRC should have sent you a new PSA for the 2018/19 tax year before April 2018. If there have been no changes since your PSA for the 2017/18 tax year was agreed, all you need to do is sign the new agreement.

Once you have a PSA in place for the 2018/19 tax year, HMRC won’t send you a new PSA and you won’t have to renew it. The agreement will continue until either you or HMRC cancels or amends it.

Deadlines

If HMRC approves your PSA before the start of the tax year, you can include any expenses and benefits contained in the agreement.

If they approve it after the start of the tax year, you may need to report some items separately.

After 5 July 2018 you can’t apply for a PSA for the 2017 to 2018 tax year so you really need to act now!

When must I pay?

You must pay any tax and NI owed under a PSA by 22 October after the tax year the PSA applies to (19 October if you send a cheque by post), and you could be subject to penalties and interest if you fail to pay or your payment is late.

For advice about whether a PSA could be appropriate for you or for any other advice regarding your finances contact the team at CHW Small Business Accountants Bolton on 01204 534031 or via our contact us page.


This article is for general guidance only. It provides an outline, and may not include points which are important to your situation. You should not depend on this blog without taking advice based on the full facts of your case. The information given was correct at the time of publication.

DID YOU FIND THIS USEFUL?

Share it with your network:  

Want more great content?
Sign up to our newsletter

Follow us

Tweets by @CHW-accounting

CHW-Accounting
@chw-accounting


Twitter: chw_accounting

Read enough?

Want to find out how we can help you and your business? Get in touch today and let's have a chat.

WHAT'S THE NEWS?

Grab a biscuit and a brew and read our latest news.

4 August 2020

‘Amnesty’ if you’ve claimed too much from the Coronavirus...

by

The Government has published further guidance in respect to compliance and the Coronavirus Job Retention Scheme (CJRS), with specific guidance for businesses who find they have…


Read more >

3 August 2020

Further details of Job Retention Bonus unveiled

by

Following the Chancellor’s announcement on 8 July of a Job Retention Bonus, the Government unveiled further details of the scheme on Friday. Purpose of the scheme…


Read more >

30 July 2020

£20 million in new grants to boost recovery of...

by

Thousands of smaller businesses in England are set to benefit from £20 million of new Government funding to help them recover from the effects of the…


Read more >

22 July 2020

Free credit control review

by

Here at CHW, we are always looking at ways to increase our service offering to ensure that you continue to get full value for money and…


Read more >

15 July 2020

Mini budget highlights

by

Last week, Rishi Sunak pledged to “protect, support and create jobs” and get pubs and restaurants “bustling again” as he unveiled his ‘mini-Budget’ to kick-start the…


Read more >

YOUR CHALLENGES

No matter what your challenge is, we’ve probably dealt with it before.



Need an Accountant?

Get in touch >


Need an Accountant?

Get in touch >


Tax issues?

Find out more >


Tax issues?

Find out more >


Trying to grow your business?

We can help >


Trying to grow your business?

We can help >


Managing cashflow?

We can help >


Managing cashflow?

We can help >


Starting a business?

We can help >


Starting a business?

We can help >


Looking for funding?

Need help with funding? >


Looking for funding?

Need help with funding? >


Buying or selling a business?

We can help >


Buying or selling a business?

We can help >


Adopt the cloud?

We can help >


Adopt the cloud?

We can help >


What else can we do for you?

We can help >


What else can we do for you?

We can help >
CONTACT US

Get in touch, no hard sell, just a brew, a biscuit and a chat.