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HMRC internal manual

PAYE Settlement Agreements

Dealing With PAYE Settlement Agreements


A PSA can be entered into any time before the 6 July following the end of the tax yearto which it applies.

You may be asked to consider whether a PSA is a suitable way of dealing with certainbenefits in kind or expenses where

  • an employer approaches you to apply for a PSA
  • as part of the annual review of current PSAs see PSA2080
  • you invite an employer to consider making a PSA application where no previous application has been made but suitable circumstances appear to exist.

On receipt of an application by an employer you must check that the proposed items aresuitable for inclusion in a PSA.

Are they?

  • Minor - see the interpretation of Minor at PSA1060
  • Irregular – see the interpretation of Irregular at PSA1070
  • or
  • Impracticable – see the interpretation of Impracticable at PSA1080

Use this flowchart tohelp you decide whether a PSA is appropriate.

Do not include items that

  • have already been (or should have been) paid under deduction of tax
  • are already included in an employee’s tax code for that year.

Consider all PSA applications positively. When you are satisfied that an applicationmeets the terms and conditions of the statutory scheme an agreement can be set up.

However, an employer does not have entitlement to a PSA, and you may refuse to enter intoan agreement if

  • the employer’s compliance record in operating and accounting for PAYE is poor, or
  • you are not satisfied that the employer will fulfil the terms of the agreement

Where you decide that the employer’s application can proceed you must follow theguidance in PSA2030.