Blog > Apply for a Paye Settlement Agreement

June 13th, 2023

If you are an employer in the United Kingdom and you provide taxable expenses and benefits for your employees, you may need to apply for a Pay As You Earn (PAYE) Settlement Agreement (PSA). A PSA is an agreement between the employer and HM Revenue and Customs (HMRC) that allows the employer to pay the tax that is due on behalf of their employees, instead of reporting the taxable expenses and benefits on each employee`s individual tax return.

PSAs are commonly used for expenses and benefits that are difficult or impractical to allocate to individual employees, such as staff parties, gifts, or shared company cars. By applying for a PSA, the employer can simplify their reporting obligations and reduce the administrative burden of dealing with multiple tax codes and calculations.

To apply for a PSA, employers must complete an annual PSA form and submit it to HMRC by the 6th of July following the end of the tax year. The form requires employers to provide a list of the expenses and benefits that they wish to include in the PSA, along with the estimated total cost and the number of employees who have received the benefit.

Once the PSA form has been submitted, HMRC will review the application and calculate the tax due based on the agreed rate for each type of benefit. The employer will then receive an invoice from HMRC for the total amount of tax due, which must be paid within 30 days.

There are several benefits to applying for a PSA, including:

– Reduced administration and paperwork: PSAs can simplify the reporting process and reduce the need for individual tax returns for employees.

– Greater certainty: By agreeing the tax due in advance, employers can avoid unexpected tax bills or penalties for errors or omissions.

– Improved employee relations: By handling the tax due on behalf of employees, employers can demonstrate their commitment to supporting staff and providing valuable benefits.

If you are unsure whether you need to apply for a PSA or require assistance with the application process, it is recommended that you seek advice from a qualified accountant or tax adviser. They can help you to assess the benefits of a PSA for your business and ensure that your application is completed accurately and on time.