Complicating PAYE Settlement Agreements

Justine Riccomini and Joanne Walker explain the implications of partially devolving income tax to Scotland and Wales for UK employers when preparing PSAs

PAYE Settlement Agreements (PSAs) were first introduced in 1996 to replace the non-statutory ‘voluntary agreements’ which employers could agree with their local PAYE inspector at the tax district. The original method was used as an administrative easement for employers that wished to settle the tax liability of their employees for items which would otherwise have to be declared on Form P11D as benefits in kind, or payrolled. Typically, items which could be settled with HMRC were staff entertaining, achievement related rewards, and gifts.

These arrangements worked well for some employers but not for others due to their informality.