HMRC is consulting on changes to simplify the process for employers of agreeing which employee expenses and benefits may be included in a PAYE settlement agreement (PSA). Having a PSA in place removes the need to report these items on form P11D or via PAYE.
The Office of Tax Simplification concluded that the current process requiring employers to reapply each year for a PSA is overly burdensome. HMRC acknowledges that PSAs are often agreed on the same terms each year. However, the government is not proposing to widen the scope of PSAs, as the OTS had also recommended.
The government is therefore considering options including:
· removing the annual requirement for employers to agree in advance with HMRC which items can be accounted for in a PSA;
· removing the ‘minor’ criterion and redefining the ‘irregular’ and ‘impracticable’ criteria;
· issuing a warning where an item is included which does not meet the criteria, and only taking action where such an item is included in subsequent years;
· aligning the PSA calculation and payment dates with the P11D/P11D(b) deadlines, meaning the calculation return would be due by 6 July and payment due by 19/22 July following the tax year;
· replacing the paper return with a digital return; and
· introducing an exemption or cap in respect of office holders.
HMRC is consulting on changes to simplify the process for employers of agreeing which employee expenses and benefits may be included in a PAYE settlement agreement (PSA). Having a PSA in place removes the need to report these items on form P11D or via PAYE.
The Office of Tax Simplification concluded that the current process requiring employers to reapply each year for a PSA is overly burdensome. HMRC acknowledges that PSAs are often agreed on the same terms each year. However, the government is not proposing to widen the scope of PSAs, as the OTS had also recommended.
The government is therefore considering options including:
· removing the annual requirement for employers to agree in advance with HMRC which items can be accounted for in a PSA;
· removing the ‘minor’ criterion and redefining the ‘irregular’ and ‘impracticable’ criteria;
· issuing a warning where an item is included which does not meet the criteria, and only taking action where such an item is included in subsequent years;
· aligning the PSA calculation and payment dates with the P11D/P11D(b) deadlines, meaning the calculation return would be due by 6 July and payment due by 19/22 July following the tax year;
· replacing the paper return with a digital return; and
· introducing an exemption or cap in respect of office holders.
