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HMRC internal manual

PAYE Settlement Agreements

Overview of PAYE Settlement Agreements: Third Party Benefits

A third party cannot enter into a PSA. If the third party is providing expenses payments or benefits incentive awards and wants to pay the tax and NICs arising on the employees behalf a Taxed Award Scheme may be used.

See PSA1100 for further information about Taxed Award Schemes.

There are certain circumstances when expenses payments or benefits provided to an employee by a third party can be included in the PSA of the direct employer. These are;

  • the employer arranged the provision of the payments, or
  • the employer did not arrange the provision of the benefits but the third party provider does not want to pay the tax on the employee’s behalf.

Third Party Employees

Occasionally an employer arranging a PSA for direct employees may also want to include in the PSA a small number of persons working alongside the direct staff who are employees of another organisation (third party employees). For example, security or agency staff working at the employer’s premises may be third party employees.

The employer organising the PSA for direct staff may want to also include third party employees in the PSA, for example where they are invited with direct staff to a function not covered by the exemption at Section 264 ITEPA 2003 (see EIM 21690). No objection should be raised if the employer includes these third party employees in the PSA being made for direct staff.