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Published on 14 October 2016

Simplifying the PAYE Settlement Agreement (PSA) process

While LITRG supports the overall aim of the new system to save time and money for employers and HMRC alike, we have a number of reservations regarding the effects that the proposed administrative ‘simplifications’ might have on small and micro employers such as care and support employers. 


Some new or ‘accidental employers’ for example, will be nervous of ‘self-assessing’ whether items are eligible for inclusion in a PSA return by referring to the legislative rules and guidance alone. For them it is crucial that they can still receive timeous guidance from HMRC, whether by telephone or webchat.

We are also concerned that while removing the ‘minor’ category of items that can be covered by a PSA may provide employers with greater clarity about what can and cannot be included in a PSA, it could also leave more employees facing a benefit in kind (BIK) tax charge on items that neither they nor their employers view as BIKs.

Receiving a benefit which is reported by the employer through ordinary P11D channels, could also then have a knock on effect on the employee's tax credits. The BIK rules for tax credits are complex – depending on the nature of the benefit, they could be counted as income for tax credits.

The consultation document can be found on GOV.UK.

The LITRG submission is available here.

Meredith McCammond

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