A Paye Settlement Agreement (PSA) is a voluntary agreement between an employer and HM Revenue and Customs (HMRC) that allows employers to pay the tax and National Insurance contributions (NICs) on certain benefits they provide to their employees.
Nowadays, with the rise of digitalization, it is possible to apply for a PSA online through the HMRC website. This simplifies the process and makes it more efficient for employers.
To apply for a PSA online, employers must log in to their government gateway account and follow the relevant prompts. The process is straightforward and takes around two weeks to complete. The employer will receive a confirmation email once their PSA has been approved.
Benefits that can be included in a PSA include things like staff entertaining, gifts, and company cars. By agreeing to pay the tax and NICs on these benefits, employers can save their employees from having to pay tax on them individually.
A PSA is particularly beneficial for employers with a large number of employees who receive non-standard benefits. It streamlines the tax process and removes the need for each employee to complete their own tax return.
It’s worth noting that PSAs are not applicable to all benefits. Certain benefits, such as those classified as “cash equivalent” or those where an employee can choose between a benefit or a cash alternative, cannot be included.
Employers must also ensure that the total tax and NICs due under the PSA are paid to HMRC by the agreed deadline. Failure to do so will result in interest and penalties being incurred.
In conclusion, applying for a PSA online is a simple and efficient process that can save employers time and money. It’s an option that is particularly useful for employers with a large number of employees or those who provide non-standard benefits. However, it’s important to ensure that all requirements are met and that payments are made on time to avoid any penalties.