As the application deadline for the 2021 PAYE Resolution Agreement (PSA) of December 31, 2021 draws closer and closer, employers should take the opportunity to review their records to identify taxable benefits in kind provided to employees/directors on which income tax, universal payroll tax (USC) and compensation-related social insurance (PRSI) have not been exploited and transferred to income via payroll. 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 the agreement if the basic calculation appears to be in order. To manage its resources, HMRC requires that calculations be submitted each year on a specific date, which may vary depending on the agreement, but which is usually July 31 or August 31. However, it should be noted that in fact, there is no legal deadline to submit the calculations, so no penalty can be imposed if you do not submit your calculation by that date. If you don`t have a PSA agreement yet, our team of labour tax specialists can help you set it up and work with HMRC to ensure the agreement includes everything you want to include now and in the future. The value of the services provided should be taxed within the PPE at the marginal tax rates of each worker concerned. It is therefore important to also take into account the tax rates that apply to workers residing in each of the UK countries, as the devolved governments (currently Scotland and Wales) are able to set the income tax rates to be paid by taxpayers residing in those countries. If you have employees residing in Scotland or Wales (whom you can identify using their PAYE codes in your payroll system), you must apply the applicable tax rates in your calculation for the benefits granted to those employees. For 2019/20, tax rates in Wales will remain consistent with rates in England and Northern Ireland, but Scottish tax rates are different and it is therefore advisable to exercise caution to ensure that you apply tax rates correctly in your calculation.

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 request, you will provide HMRC with a calculation of the tax and NIC due on a extrapolated basis to the appropriate tax rate and pay the amount due. Items included 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 subject to Class 1B (NCI) social security contributions, rather than Class 1A CNI due through P11D(b). A PSA can also help reduce the administrative burden on the employer by eliminating the requirement to include certain taxable expenses/benefits for employees` P11Ds and replace them with an annual statement with HMRC. The expenses or benefits to be included must be “minor”, “irregular” or “impractical” to operate pay on the post: Despite these obvious advantages, MESSAGES are expensive because the employer is obliged to “extrapolate” the PSA item for income tax and NIC. The combined effective rates of income tax and CNI for the employer are as follows: Since April 2018, the annual contract renewal process for MESSAGES has been simplified, so it is not necessary for employers to agree on a PSA with hmrc each year in advance if the categories remain the same. Once the PPE is agreed, it will remain in place until the employer or HMRC cancels or amends it. For example, the total cost of a £100 gift as part of a PSA for a 40% taxpayer is around £190. Another often overlooked benefit of a PSA is less exposure to penalties and interest. It can be difficult to keep track of the tax reporting obligations of all expenses paid to employees throughout the year.

This often leads to a rich choice for HMRC during the employer`s inevitable compliance visit. PPE allows you to conduct an inspection at the end of the year to make sure you have collected all of these taxable items. It can also help you show HMRC that you understand the issues and take your compliance agreements in this area seriously. Tax on PPE is payable by the employer at a rate equal to the tax rate paid by each employee during the year. Class 1B social security is paid at the rate of 13.8% on the value of the benefit + the amount of tax paid on behalf of the employee. If you do not yet have PPE and do not exceed this period, it is possible to make voluntary disclosure and billing for items that you would otherwise have included in a PPE. However, in certain circumstances, HMRC may impose penalties and charge interest on which is paid in this manner. PAYE Billing Agreements (PSAs) are often used by employers to maintain compliance with employee cost and performance processes. By entering into this formal agreement, an employer can pay all taxes due on expenses and benefits made available to employees through an annual submission and payment to HMRC. Sarah Conry is Director of the Global Employer Services (GES) Group.

She currently advises various multinationals on their global mobility functions and compensation strategies. Read more The deadline to file income tax and NIC psa calculations with HMRC is specified in the agreement and usually ends on July 31 after the end of the tax year. The deadline 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. A PSA is a useful tool to facilitate the granting of benefits to employees without having to bear the tax costs. For example, employees are unlikely to be satisfied if the cost of a human resources function is included in their P11D! If you already have an EPS, we can review your existing PPE process to make sure you take advantage of all applicable exemptions and ultimately pay the correct amount of tax. The deadline for applying for PPE is July 5 and the deadline for payment is October 19. There is no specific deadline for submission, but we recommend that you submit it at least one month before the payment deadline. Some staff costs are covered by exemptions (which have replaced derogations). This means you don`t have to include them in your year-end reports. 2. Christmas party or a similar annual exemption from function. Simply put, the cost of an annual function can be exempt if: The application to use the PSA mechanism must be submitted to revenue before December 31, 2021.

The PSE must be submitted and the corresponding liability must be paid to the Revenue no later than January 23, 2022. The submission of PPE must disclose certain details set out in the legislation. Social sign-in is currently not available in the Microsoft Edge browser. For more information, download a copy of the PAYE Settlement Agreement Guide. .