Employment Tax

Calculating the tax and NIC due under a PSA

Produced by Tolley in association with Robert Woodward
  • 01 Apr 2022 14:41

The following Employment Tax guidance note Produced by Tolley in association with Robert Woodward provides comprehensive and up to date tax information covering:

  • Calculating the tax and NIC due under a PSA
  • Tax calculation
  • Scottish taxpayers
  • Welsh taxpayers
  • Class 1B NIC
  • Example calculations
  • Why might an employer not want to put a PSA in place?
  • Individual qualification for statutory benefits affected by PSA

Calculating the tax and NIC due under a PSA

The first step in calculating the benefit is to bring together the total costs liable to tax. Sources for these include the following:

  1. employee’s expense claim forms especially directors

  2. employee’s company credit card bills

  3. petty cash

  4. termination payments and compromise agreements

  5. purchase invoices

  6. travelling and subsistence expense codes

  7. entertainment and gifts expense codes

  8. personnel records for relocation cost and expense claims for same period

  9. personnel records for temporary secondments

  10. anywhere else an employee can claim or be reimbursed costs

The next stage is to add back any VAT incurred on the costs that have been reclaimed, as all calculations of the taxable value of a benefit are made on the VAT-inclusive amount, whether or not the employer is able to reclaim the VAT.

Once these costs have been established, these should be collated to reflect the areas agreed with HMRC in the PSA agreement (see the PAYE Settlement Agreements (PSA) ― overview guidance note).

Finally, the costs should be apportioned

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