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HMRC internal manual

National Insurance Manual

Class 1A National Insurance contributions: Exemptions from Class 1A NICs: Benefits included in a PAYE Settlement Agreement

Section 10(6) SSCBA 1992No Class 1A NICs are payable on benefits included in a PAYE Settlement Agreement (PSA).

A PSA is a formal agreement between HMRC and an employer. The agreement allows an employer to account for tax on certain benefits in a lump sum after the end of the tax year, rather than having to apply the normal routine of reporting benefits on individual P11Ds/P9Ds.

To be included in a PSA a benefit, like an expense, must be

  • minor – for example, gift vouchers and small gifts, or
  • irregular – for example, occasional use of a company holiday flat impractical – where it is impractical to apply PAYE or apportion the value of particular benefits which have been shared by a number of employees, for example, a shared car. A PSA should not include large benefits provided regularly to individual employees such as company cars, car fuel or beneficial loans, or round sum allowances.

A benefit included in a PSA that would otherwise be liable for Class 1A NICs will attract Class 1B NICs.

Guidance on PSAs and Class 1B NICs is given at [## Section 10(6) SSCBA 1992No Class 1A NICs are payable on benefits included in a PAYE Settlement Agreement (PSA).

A PSA is a formal agreement between HMRC and an employer. The agreement allows an employer to account for tax on certain benefits in a lump sum after the end of the tax year, rather than having to apply the normal routine of reporting benefits on individual P11Ds/P9Ds.

To be included in a PSA a benefit, like an expense, must be

  • minor – for example, gift vouchers and small gifts, or
  • irregular – for example, occasional use of a company holiday flat impractical – where it is impractical to apply PAYE or apportion the value of particular benefits which have been shared by a number of employees, for example, a shared car. A PSA should not include large benefits provided regularly to individual employees such as company cars, car fuel or beneficial loans, or round sum allowances.

A benefit included in a PSA that would otherwise be liable for Class 1A NICs will attract Class 1B NICs.

Guidance on PSAs and Class 1B NICs is given at](https://www.gov.uk/hmrc-internal-manuals/national-insurance-manual/nim18000) onwards. That guidance applies to benefits and expenses. You will also find guidance about PSAs in the PAYE Settlement Agreements manual.