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PAYE Settlement Agreement for Employee Benefits – Apply Online
25th May 2023
There is an alternative to completing forms P11D for employee benefits. What is it and how does it work?
What is a PAYE Settlement Agreement (PSA)?
Generally, reporting of employee benefits is done through producing forms P11D for each employee that is provided a benefit in relation to their employment.
However, there is an alternative for certain minor or irregular benefits and expenses which are hard to quantify, in which the employer can settle the employee’s tax liability.
This is a good option where an employer wishes to reward its employees without the employees incurring additional tax on the benefit provided.
Common benefits that can be included in a PSA are:
- Staff parties costing £150 or more per head (VAT inclusive)
- Long service awards
- Staff entertainment
- Small gifts and vouchers
How To Apply for a PSA
You can now apply for a PSA online through your online PAYE account. If you are unable to apply online, you can apply by post.
Once agreed with HM Revenue and Customs (HMRC), a PSA continues until the employer or HMRC changes or cancels it.
Deadlines
Your application must reach HMRC by 6 July following the end of the relevant tax year (5 April).
Class 1B National Insurance (NICs) is charged on benefits included within a PSA.
These are payable by the employer on the total cost of the benefit, plus the income tax that the employer is paying on behalf of the employee (i.e. the grossed-up value of the benefit).
The due date for payment of the income tax and Class 1B NICs is 19 October (or 22 October if payment is made electronically) following the end of the tax year.
Although there is no formal deadline for the submission of a PSA, if this is not submitted by 31 October following the end of the tax year, the PSA will be invalid.
Further Information
If you have any queries or require our assistance in applying for and filing your PSA, please contact your normal Bishop Fleming contact or a member of the Employer Solutions team.
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