Call for Evidence: PAYE Settlement Agreements (PSAs)

The ATT has responded to HMRC's Call for Evidence on how PAYE Settlement Agreements (PSAs) operate in practice.

A PSA is a voluntary arrangement that allows employers to settle the Income Tax and National Insurance contributions due on certain benefits and expenses on behalf of their employees. It is normally used for benefits which are minor, irregular, or impracticable to report through normal routes. 

The Call for Evidence sought to find our more about how organisations are using PSAs and whether the volume or types of expenses and benefits included have changed in recent years. It explored how organisations decide what to include in a PSA, as well as asking questions about managing, operating and agreeing PSAs and how employers approach calculations.

In our response, we explained that member feedback told us how PSAs play an important role in allowing employers to meet their reporting obligations without the administrative burden of reporting what may be relatively small amounts on Forms P11D for individual employees. We mentioned our recent budget representation to HM Treasury highlighting some practical issues with the trivial benefits exemption, which has not increased since it was introduced in April 2016 and how this impacts on how employers use PSAs.

Whilst an illustrative or non-exhaustive list of items that can and cannot be included in a PSA may be useful to employers, we we would not support a definitive or exhaustive list, as we feel that this would not take account of the fact that benefits and expenses can vary considerably between employers.

As part of improving the PSA process, we suggested that HMRC should make better use of technology as part of the PSA process, as this could reduce the delays currently being experienced by manual processes. We recommended that HMRC develop an Application Program Interface (API), which would incentivise software developers to develop products that can accurately calculate PSA liabilities. 

We also encouraged HMRC to consider introducing group-wide PSA agreements to help reduce the compliance cost for corporate groups.