Items contained in a PSA do not need to be reported separately, for example via payroll or in the employee`s P11D. Instead of being imposed on the employee by the P11D procedure, they are imposed by this annual declaration on the employer. In addition, the value of benefits is not subject to the class 1A NIC due through P11D(b), but to class 1B social security contributions (NCI). Cash payments such as bonuses and round-sum allowances cannot be included in a PSA and must therefore go through payroll. Since April 2018, the annual contract renewal process for MESSAGES has been simplified, so employers do not need to agree in advance on a PSA with HMRC each year if the categories remain the same. Once agreed, the PPE will remain in effect until the employer or HMRC cancels or amends it. There are three categories of items that can be included in a PSA. Expenses or benefits must be minor, irregular or impracticable. A PPE is a formal agreement requested in writing between the employer and HMRC. The deadline for applying for PPE is July 5 after the end of the taxation year to which it relates. However, the PPE cannot be applied retroactively to expenses or benefits to which the PAYE should have been applied.

It is therefore recommended that you agree on a PSA before the start of the tax year to ensure that all the elements you want to include can be included from the outset. Once HMRC has agreed on the costs and services to be covered by your PSA, it will approve the agreement and send you a signed P626 form. We have expertise in this area and can certainly accompany you, so you should contact your manager at Myers Clark or Priya in priyar@myersclark.co.uk if you are not sure. Confusion very often arises as to whether an expense is taxable and if so, it must be declared via the pay slip included on P11d or via PPE. Now is the time before July to ask for clarification if you have any doubts. When rewarding employees or making payments, as described in the examples above, it`s important that you don`t ignore this area, because whenever a payroll audit takes place through HMRC, it focuses on the expenses and benefits you offer your employees. To be included in a PSA, the article: Expenses or benefits to include must be “minor,” “irregular,” or “impractical” to make PAYE work on the post: In one of our blogs earlier this month, we talked about when you need to fill out a P11d form when it comes to benefits and expenses. Due to the pandemic and lockdown, many companies have had to spend extra money on their employees to facilitate the transformation of the work environment. In our P11d blog, we discussed the benefits you need to report, so please read if you`re not familiar. To manage its resources, HMRC requires that calculations be submitted each year on a specific date, which may vary from agreement to agreement, but which is generally 31 July or 31 August.

However, it should be noted that in fact, there is no legal deadline to submit the calculations, so no penalty can be imposed for not submitting your calculation on that date. Once PPE is in force, it remains valid unless it is modified or cancelled by the employer or HMRC. If you`ve had a PSA for a long time, we recommend doing a review to see if the deal still offers the most optimal tax benefits. The deadline for filing income tax and NIC psa calculations with HMRC is specified in the agreement and is usually July 31 after the end of the tax year. The due date to settle the PPE liability is October 22 after the end of the taxation year or October 19 if the employer does not pay electronically. If you do not yet have PPE and do not meet this deadline, it is possible to make voluntary disclosure and billing for items that you would otherwise have included in a PSA. However, in certain circumstances, HMRC may impose penalties and charge interest on amounts paid in this manner. The guidelines published by HMRC state that PPE cannot include cash payments or major in-kind contributions. Here are examples of items that cannot be included in an EPS: MESSAGES remain in place for future years until they are cancelled. Employers must therefore agree with HMRC on any benefits or expenses that are not included in a previous year`s PSA. A PPE is a useful tool to facilitate the granting of benefits to employees without the employee having to bear the tax costs.

For example, employees are unlikely to be satisfied if the cost of an employee function is included in their P11D! Use a PSA1 form to calculate the amount of taxes and social security you will have to pay. If you are satisfied, you can submit the calculation via a spreadsheet, which we often do for our customers. You must agree with HMRC on the type of expenses and benefits you wish to include in the PPE before the end of the annual period. If HMRC accepts the application, you will submit to HMRC a calculation of the tax and NIC due on a basis extrapolated to the relevant tax rate and pay the amount due. To apply for PPE, an employer must write to HMRC and provide details of the benefits and expenses they wish to include in the PPE. Once HMRC has agreed on the EPS points, it will send two drafts of Form P626. Both copies must be signed and returned to HMRC. A copy will be signed by HMRC and returned to the employer. This should be kept safe as it is proof that PPE is present.

Your agreement will continue for years to come, but you will need to renew it every year. Once your PSA is accepted, it will remain in place until you cancel it in writing, so HMRC expects you to inquire if, for example, no fees have been paid for a year. Not all items can be included in a PSA. For example, you can`t include salaries, high-value benefits like company cars, or cash payments like PAYE Settlement Agreements (PEAs), which are commonly used by employers to maintain compliance with employee expenses and performance processes. By entering into this formal agreement, an employer can pay all taxes on expenses and benefits granted to employees through an annual return and payment to HMRC. Once HMRC has agreed that the item can be covered, it will send you (by mail) 2 copies of the agreement. You must sign both agreements and return them to HMRC. Examples of taxable items that may be included in PPE include include: You must enter into the agreement before July 6 following the taxation year in order to use the PPE. If this is not done on time, a P11D for that tax year must be filed instead. The expenses or benefits included in a PSA should be defined as follows: If you don`t already have a PSA agreement, our team of labor tax specialists can help you set it up and contact HMRC to make sure the agreement includes everything you want to include now and in the future.

A PSA is a very effective simplification of expense and performance processes that allows you to reduce reporting requirements, ensure that HMRC compliance is properly managed, and help with employee rewards as they do not incur taxes or NICs for items included in the PSA. You must provide HMRC with an annual calculation of the income tax due and the Class 1B network card. HMRC will review the calculation and confirm approval if the basic calculation appears to be in order. Sign up to receive the latest news and ideas from BDO You could be fined or charged if payment is not made on time. In general, expenses incurred solely to enable your employees to work and perform their duties do not need to be reported to HM Revenue & Customs (HMRC). This has always been the rule and is no different with Covid. Provisions of PSA and test kits in the last year are also excluded. The tax due for PPE and class 1B network CARD must be paid to HMRC no later than 19 October after the tax year to which the PPE relates (22 October if you pay electronically). A PAYE Settlement Agreement (PSA) allows you to make an annual payment to cover all taxes and Social Security due for minor, irregular, or unachievable expenses or benefits for your employees. If employers receive PPE for these expenses or benefits, they do not have to: PPE can be agreed before July 6 after the end of the taxation year for which it first applies. The deadline to pay taxes and Social Security is October 22, 2021 (in the example above) or October 19 if you don`t pay online. Please do not use your PAYE account office reference number to make your payment, as HMRC cannot identify your PSA payment.

Public service announcements are an administrative arrangement that allows employers to pay the tax and CNI on behalf of their employees on certain taxable expenses or benefits, by .B. Employee entertainment and incentive bonuses instead of returning them as benefits in kind on P11D forms or including them in payroll. For more information on MESSAGES, please contact John Manis on 020 7131 8984, Alfie Heath on 020 7131 8874 or Sarah Richardson on 020 7131 8008. Form PSA1 is used to calculate the amount of Category 1B fees and NICs due for benefits and expenses under an ASP. This must be sent to HMRC after the end of the tax year. All taxes or network cards due for 2020-21 under a PSA must be paid electronically to be paid into HMRC`s bank account by 22 October 2021. . . . .