By Aaron Hemmington
Hawsons
UNDER the current rules, employers can account for tax and National Insurance on minor or irregular perks provided to employees using a PAYE Settlement Agreement (PSA). However, employers must obtain agreement from HMRC by 6 July following the end of the tax year in which the perks were provided. The benefits of PSAs are:
* they save on administration in terms of having to produce multiple P11Ds for small and irregular amounts
* they can assist with employee relations as the employer can settle the tax and National Insurance on things such as staff entertaining which may not be covered by the annual events exemption
HM Revenue & Customs have finally announced improvements to the way PSAs will operate. Although these changes won’t be implemented until April 2018, employers who apply for PSAs will know this overhaul is long overdue.
In April 2018 HMRC plan to:
o provide an online digital service for submitting PSA reports and paying the related tax and NI
o remove the need for an annual up-front PSA agreement
o improve its guidance for employers.
As it currently stands, payment deadlines in respect of PSAs will remain as the 19 October following the tax year for physical payments and 22 October for electronic payments.
The news that HMRC wish to improve their guidance to employers on what can or can’t go into a PSA is welcome. There has been discussion via HMRC’s consultation process on the proposed changes around this subject.
HMRC have noted that employers want more clarity on what is acceptable to include in a PSA, and a possible increase in the scope of what a PSA can include. The plans to remove the ‘minor’ criterion from the PSA was not received well as it would leave many items ambiguous that do not readily fit into other criteria.
The consultation process was set to end on 21 February 2018 and therefore there is still some time to go before HMRC announce the exact new guidelines and whether this guidance will indeed improve the applications of PSA settlements.
For more information regarding PSAs contact Aaron Hemmington at Hawsons Chartered Accountants on 01604 645600, email or visit www.hawsons.co.uk