Paye Settlement Agreements

A PAYE Settlement Agreement (PSA) allows employers to make one annual payment to cover all the tax and National Insurance due on small or irregular taxable expenses or benefits for your employees.

The expenses or benefits included in a PSA must be defined as one of the following;

  • minor – e.g. a small birthday present
  • irregular – e.g. one-off relocation expenses over £8,000 (these are tax-free below £8,000)
  • impracticable (difficult to work out the value of or divide up between individual employees) – e.g. shared cars or taxi journeys

Employers that are required to notify HMRC of the value of items included in a PAYE Settlement Agreement (PSA) must do so using form PSA1. The form for the tax year ended 5 April 2015 has recently been published on GOV.UK. The latest date for an electronic payment for a PSA for the year ended 5 April 2015 to clear into HMRC’s bank account is 22 October. Employers that pay by cheque must ensure that the payment reaches HMRC’s Accounts Office by 19 October.

There may be interest and / or a late payment penalty due where the payment is made late. Payments for PSAs must include a unique PSA reference number. Employers that do not have a PSA reference number should contact the office dealing with their application for advice.