As we approach the end of the 2019/2020 tax year, employers in the UK may find themselves needing to calculate and arrange for payment of their Paye Settlement Agreement (PSA). A PSA is an agreement made between an employer and HM Revenue & Customs (HMRC) to settle any tax and National Insurance contributions (NICs) on certain expenses and benefits provided to employees.
Calculating the amount due for a PSA can be a complex process, so it`s important to have a thorough understanding of the rules and regulations around these agreements. Here are some key considerations to keep in mind when calculating your PSA for the 2019/2020 tax year:
1. Eligibility: Not all expenses and benefits can be covered under a PSA. HMRC has specific rules around what can and cannot be included, so it`s important to review these carefully before making any arrangements. Common items that can be included in a PSA include staff entertainment expenses, work-related training expenses, and non-business travel expenses.
2. Exclusions: Some expenses and benefits cannot be covered under a PSA, even if they might seem like they would be eligible. For example, expenses that are fully deductible for tax purposes (such as travel for work purposes) cannot be included in a PSA. Similarly, benefits that are exempt from tax (such as workplace parking) cannot be included.
3. Calculation: The calculation of a PSA can be quite complex, as it involves estimating the tax and NICs that would be due on each individual item covered under the agreement. This requires a thorough understanding of the tax rules and rates, as well as the ability to estimate the value of each item provided to employees throughout the year.
4. Deadlines: The deadline for submitting a PSA to HMRC is July 6th following the end of the tax year. This means that employers must ensure that all relevant expenses and benefits have been identified and accounted for before this deadline, in order to avoid any penalties or additional charges.
Overall, calculating and arranging payment of a PSA can be a complex process, but it`s an important step in ensuring compliance with tax regulations and avoiding any unexpected charges or penalties. Employers who are unsure about the rules and requirements for a PSA should seek professional advice or consult HMRC guidance to ensure that they are following the correct procedures.