Gerry MacCrossan
Where benefits in kind are provided to employees, this will usually result in an income tax charge on the employee and a Class 1A national insurance (NI) charge on the employer. The rate to be used for 2022/23 is 14.53% due to the withdrawal of the 1.25% Health and Social Care levy partway through the year.
The income tax charge on the employee can be avoided if the employer enters into a PAYE settlement agreement (PSA) with HMRC, whereby the employer pays the income tax on the employee’s behalf. However, not all benefits provided may be dealt with this way. The benefits must be minor, irregular, or impracticable. Impracticable means that the expenses and benefits are difficult to place a value on or divide up between individual employees. An example would be the costs of a staff party where the £150 per head limit has been exceeded.
From 6 April 2023, there will be a new online service available from HMRC for employers and their agents to apply for a PAYE settlement agreement (PSA). Employers and agents can also use the online service to amend or cancel an existing PSA. To support these changes, HMRC has updated its guidance on PSAs to include a reference to the new online tools.
What can be included in the PSA depends on when you apply. If you applied for a PSA before the start of a tax year, you could include any expenses and benefits contained in the agreement. If you applied for a PSA partway through the tax year, you may need to report some items separately on form P11d.
Employers must pay any tax and Class 1B NIC owed under a PSA by 22 October after the tax year to which the PSA applies (19 October if paying by cheque).