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HMRC internal manual

National Insurance Manual

From
HM Revenue & Customs
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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 NIM18000 onwards. That guidance applies to benefits and expenses. You will also find guidance about PSAs in the PAYE Settlement Agreements manual.