Managing your PSAs with expenses

PAYE Settlement Agreements (PSAs) are a more flexible way of dealing with some expenses payments and Benefits in Kind.

PSAs can generate goodwill from employees and, by controlling your PSA through expenses , save you work whilst ensuring you are processing such Benefits in Kind correctly.

What is a PAYE Settlement Agreement (PSA) and how can it help?
A PSA is a voluntary agreement between your organisation and your local HM Revenue & Customs office, enabling you to meet the tax due on certain expenses and Benefits in Kind that you give to your employees.

With a PSA you do not have to:

• enter the items covered on form P9d or P11d
• operate PAYE on covered items
• assess NICs liability for included items which are liable for Class 1 or Class1A NICs

You do pay Class 1B NICs on the items included in PSAs and on the total amount of tax payable.

Your employees do not need to include PSA items on their personal tax returns. 

What kind of employee expenses and Benefits in Kind can be included?
There are many kinds of employee expenses or Benefits in Kind which can be included in a PSA, for example:

• minor items such as taxi fares you pay or reimburse, incidental travel costs, small gifts or use of a pool car where the items are taxable
• items which are paid or made available on an irregular basis, such as a holiday given under an incentive award scheme or the occasional use of a company holiday flat
• items that it is impracticable to apply PAYE to, or identify precisely what should be included on form P9d or P11d. e.g. Christmas parties and similar entertainment you provide which does not already qualify for relief

Some benefits, such as business lunches, staff motivation days and birthday gifts may not need to be included in PSAs. (Your local HM Revenue & Customs Inspector will provide you with full inclusion details.)

So, how can expenses help with PSAs?
By recording each employee expense and benefits in kind item, expenses enables you to report and export each item that should be included in each employee’s PSA.

expenses is configured to recognise whether an employee is on the basic rate or higher rate of tax and, from this information, gives you an end of year report showing the total value of benefits provided to basic rate employee, and the value of benefits to higher rate employees.  Having these two figures at the touch of a button means that calculating your annual PSA amounts takes minutes, rather than days.

As with all expenses reports the PSA data is generated to give you a quick total, but also facilitates the drilling down to the route of every item claimed by every employee. This also enables you to identify items that do not need to be included, where there is a business reason for the expenditure rather than a Benefits in Kind liability.

Further information on PSAs is available from the HM Revenues & Customs website

If you have any questions about how expenses can help you to manage your PSAs simply and effectively, please call our expenses team on 01522 881300. Alternatively you can request that a member of our team contacts you by clicking here

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