Most employers, at some time or another, will provide employees with a taxable benefit where they do not wish the employee to bear the tax burden. Examples can include:

• a trip to the local pub or restaurant for a “business lunch”
• providing a sales prize or incentive
• retirement gifts (new rules from April 2006)
• the reimbursement of the mileage costs an employee incurs in going to the office to deal with an alarm call or coming in on their day off
• mini-bar, laundry or videos claimed when working away on business
• accommodation costs where an employee stays at or near his permanent workplace having worked late to meet that last minute deadline.

If you provide your employees with taxable benefits which fulfil the PSA criteria of being minor, irregular or impractical to apply PAYE to, and you as an employer wish to pay the income tax on behalf of your employees then you need to apply for a PSA by the 6th of July following the end of the tax year.

Whilst PSA’s are expensive for an employer (notional 88% higher rate of tax and 45% notional basic rate of tax) they are a good indicator that an employer has considered all taxable benefits provided to employees and has either returned the benefit via P11D or settled the tax via a PSA.

Key dates

The Agreement needs to be in place by the 6 July, following the end of the tax year (although if settling items that attract a Class 1 NIC liability, it is best to agree the PSA before the start of the tax year).

The computations are usually by a convenient date mutually agreed between the employer and HMRC.

The payment of income tax and NI is due by the 19 October.

If you would like any additional information on how to apply for a PSA, or what may be included within it, then please do let us know. 

This page was last updated on Friday, January 04, 2008.