PAYE settlement agreements – do you need one?

Date posted: 13th Apr 2023

If an employer provides a benefit to an employee (company car, private medical, gym membership etc), then it is usually the case that such benefits are declared on forms P11D.

However, where that benefit is minor or irregular, then completing a form P11D can mean a lot of work for an employer. In addition, the employee may feel aggrieved at paying tax on, say, a birthday gift which may be in excess of the HMRC trivial benefit limit.

Therefore, a PAYE settlement agreement (PSA) may be an appropriate route to avoid such issues. A PSA allows employers to make an annual payment to cover all the tax and national insurance due on minor or irregular taxable benefits.

To qualify to make a PSA, the benefits must fall into one of the following categories;

  • minor – say a small gift on the birth of a child
  • irregular – relocation expenses over £8,000
  • impracticable to work out the value per employee – e.g., shared travel journeys such as a taxi.

If you wish to use the PSA route to settle the tax/national insurance, then you must notify HMRC of your intention to do so. The deadline for applying for a PSA for 2022/23 is 5 July 2023.

If you have any queries regarding PSA’s, please give us a call.


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