A PSA is an agreement entered into with HMRC whereby an employer is allowed to make an annual payment to cover the tax and National Insurance liabilities due on small or irregular taxable benefits or expenses provided to employees.
As part of the Office for Tax Simplifications (OTS) reviews to look to address areas where the tax systems could be simplified, a consultation document was raised in summer 2016 to simplify the process for agreeing and reporting PSAs.
The proposals under consideration were to remove the requirement for the employer to seek up-front agreement as to what should be included, to digitalise the PSA return, to align the calculation and payment dates for PSA with that of P11D/P11D (b) deadlines and whether to bring in a cap for office holders, similar to that under trivial benefits.
Following the outcome of the consultation the proposals taken forward are that the requirement for employers to obtain, in advance an annual agreement from HMRC as to what can be included in their PSA will be removed. In addition HMRC will move towards digitalising the PSA process, which does fall in line with their on-going principles of Making Tax Digital.
It is envisaged that these measures will both simplify the process and be less time consuming for employers in general.
These changes will take apply from 6 April 2018 and will form part of the Finance Bill 2017.
OTS did recommend that the Government widen the scope of PSAs so that employers can choose to pay the tax liabilities on any items provided to their employees and whilst this proposal was not taken forward, Government has indicated that this matter will be kept under review so there is still the possibility that at some point in the future this may be re-considered.
Whilst the current criteria as to what falls within the scope of a PSA is to remain, Government has agreed that further clarification of what constitutes “minor, irregular and impracticable” will be provided to assist employers in establishing what can or cannot be included. To this end further clarification is to be incorporated into the current guidance to assist with the process and Government will be looking to engage with employers and other stakeholders to ensure that the revised guidance is clear.