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. 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. Once HMRC has agreed on the costs and benefits to be covered by your PPE, it will approve the agreement and send you a signed P626 form. 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. 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. 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. You must enter into the agreement before July 6 following the tax year in order to use the PPE. If this is not done on time, a P11D for that tax year must be filed instead. 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. The agreement will continue until you or HMRC have to terminate it or you have to modify it. You do not have to renew the PPE every tax year. To subscribe to GMS Flash Alert, fill out the registration form. Customers may be fined or charged interest or a late payment penalty if they do not pay or if their payment is late. “Employers should take this opportunity to review their records to determine if there are any minor and irregular in-kind benefits, gifts, allowances and expenses for employees in 2021 that were not taxed by the payroll and that they might want to include in a 2021 PSA. When determining the benefits to be included in the PSA, they should consider the December 31, 2021 application deadline and the tight processing time to file PPE and pay income liabilities by January 23, 2022. As noted earlier, given the increase in revenue verification activities we have seen recently, we also expect that the MESSAGESPs will be subject to further review.
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! Also note that since the company pays a tax liability on behalf of its employees, this is another benefit and therefore the tax due is calculated on a projected basis. A PSA allows an employer to pay income tax, USC, and PRSI outside of payroll regarding employee/administrator benefits if the benefits granted are: Upon payment, your customers must ensure that they provide their PSA reference number, which is indicated on their PSA confirmation letter. You must not use your PAYE Accounts Office reference to make your PSA payment. Indeed, payments received with the reference of the PAYE Accounts Office are assigned to their normal PAYE account and they continue to receive reminders for the PSA payment even if they have paid. Once they have agreed on what can be included, they will send you 2 drafts of The P626 form. Sign both copies and return them. HMRC will approve your application and send you a form – this is your PSA.
Examples of taxable items that may be included in PPE include include: If your customer has not received their pay confirmation letter, they must pay the tax and social security amount they charged for their PPE and submitted to HMRC. Customers do not have to wait to receive their pay confirmation from HMRC. All electronic payments related to PPE must be received to HMRC`s bank account by 22 October 2020. 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 advisable to agree on PPE before the start of the tax year to ensure that all the elements you want to include can be included from the outset. There is a legal deadline for the payment of the tax due and nic. This date is October 19. Failure to pay the tax due on that date may result in penalties and interest. You must report anything that cannot be included separately using Form P11D. You don`t need to send a P11D when you pay employee expenses and benefits through your payroll.
The elements typically included in a PSA vary greatly by employer, but common examples are: when making the payment to HMRC, it is important that you use the right reference. This will ensure that your payment reaches your account and that you do not receive any reminders after payment. You will have to wait for HMRC to send you the pay slip to pay your PSA as it will contain the unique reference number you will need to provide at checkout. 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. We also support you in the analysis of your expense data and the execution of PSA calculations up to the management of the entire process on an outsourced basis. While there are no changes to the process/requirements for 2021, we have seen an increase in audit and revenue intervention activities (e.g. B, appearance queries) in recent months.
The results of these activities suggest that Revenue is applying legislation and guidelines more rigorously in certain areas, such as . B employee entertainment. Companies that have had a PSA for several years can often benefit from a review of their process to ensure they are paying the right amount of tax and NIC (and no more). We regularly see examples of companies simply following the process they have followed in previous years without taking into account changes in tax regulations. This can lead to unexpected risks or even an overpayment of taxes and NICs. Since the introduction of real-time reporting (RTR) in January 2019 (see GMS Flash Alert 2018-106, 6. August 2018), employers are required to report payment details to employees/administrators no later than the payment date. In the case of fictitious remuneration or benefits in kind (BIK), the amount is indicated in the payroll either (1) on the day on which the fictitious payment/benefit is made, or (2) on the day preceding (a) the next payment date or (b) December 31 of the year. Write to HM Revenue and Customs (HMRC) Business Tax and Customs and describe the expenses and benefits that the PAYE Settlement Agreement (PSA) is intended to cover. The guidelines published by HMRC state that PPE cannot include cash payments or major benefits in kind. .