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HMRC internal manual

Employment Income Manual

Incentive award schemes: pay as you earn settlement agreements (PSAs)

PSAs general

PSAs are arrangements whereby employers can meet the tax payable on expenses and benefits they give to their own employees, but not the tax payable on cash payments of wages, salaries or bonuses.

PSAs and incentive award schemes

Provided the terms and conditions of a PSA are satisfied, the arrangements can be used by a direct employer to pay tax on non-cash incentive awards. Third parties cannot enter into PSAs. The PSA Handbook covers all aspects of the handling of PAYE settlement agreements.

It is likely that most employers who provide non-cash incentive awards to their own employees and want to meet the tax bill will use PSAs to do this in preference to using taxed award schemes (see EIM11235).

Where incentive awards are covered by a PSA the employee is not liable to tax on the awards. The details should not be entered in any tax return if one is sent.