A Paye Settlement Agreement (PSA) is an agreement made between an employer and HM Revenue & Customs (HMRC) under which the employer takes on the responsibility of paying a tax liability on behalf of its employees. The PSA is used to report and settle any tax liabilities that cannot be paid through standard PAYE (Pay As You Earn) procedures.
The deadline for submitting a PSA is 6 July following the end of the tax year to which it relates. For example, if you wish to submit a PSA for the 2020/21 tax year, the deadline is 6 July 2021. The PSA must be submitted using the appropriate form (PSA1) which can be downloaded from the HMRC website.
The PSA covers any expenses or benefits that have been provided to employees that are not already covered by standard PAYE procedures. This can include items such as Christmas parties, gifts, and travel expenses.
The PSA is an important tool for employers as it allows them to reduce the administrative burden of reporting and paying tax liabilities for their employees. It also provides certainty that their tax affairs are in order and helps to avoid any potential penalties or interest charges from HMRC.
When submitting a PSA, it is important to ensure that all expenses and benefits are correctly identified and accounted for. This will help to avoid any issues with HMRC and ensure that the tax liability is accurately calculated.
If you miss the deadline for submitting a PSA, you may still be able to make a voluntary disclosure to HMRC. However, this is likely to incur penalties and interest charges, so it is best to ensure that you submit the PSA on time.
Overall, the PSA is an important tool for employers to manage their tax liabilities and ensure that their tax affairs are in order. By submitting the PSA on time and correctly identifying all expenses and benefits, employers can avoid potential penalties and interest charges from HMRC.