Employment Tax

Variation / withdrawal of a PSA and PSA penalties

Produced by Tolley in association with Robert Woodward
  • 15 Dec 2021 14:11

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

  • Variation / withdrawal of a PSA and PSA penalties
  • Variation of PSAs
  • Withdrawal of PSA
  • PSA determination of liabilities by HMRC
  • PSA penalties

Variation / withdrawal of a PSA and PSA penalties

Variation of PSAs

An employer may want to vary a PSA in two ways:

  1. to change the items covered

  2. to adjust the calculation

Varying the benefits covered in a PAYE settlement agreement (PSA), provided this takes place before the PSA deadline (6 July following the end of the tax year) and assuming HMRC agrees, should not pose any problems. Variation after the deadline can take place but only at HMRC’s discretion. Variation can be applied for by writing to the HMRC office that issued the PSA as there is no standard form.

If HMRC does not agree to the inclusion of additional benefits in a PSA, the default position is that they must be declared on form P11D. If, however, the P11Ds have already been submitted, employers will need to either submit updated P11Ds or consider voluntary disclosure of the benefits not reported to HMRC (see the What if the P11D is wrong? guidance note).

On a practical level, if a benefit is already included in a PSA but has not actually been provided by the employer in a tax year, there is no obligation to report this to HMRC (ie NIL PSA submissions to HMRC are quite common and should not raise any questions). Variations should only concern the addition of further benefits to the agreement and not the removal of those already in place.

In adjusting the calculation, employers should be aware that the submission of the calculation to HMRC before 19 October

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