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HMRC internal manual

PAYE Settlement Agreements

Dealing With PAYE Settlement Agreements: Initial applications for a PSA

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

You should consider whether a PSA is a suitable way of dealing with certain benefits in kind or expenses where

  • an employer approaches you to apply for a PSA or
  • you invite an employer to consider agreeing to one where an application has not been made but suitable items are being paid or provided

On receipt of an application by an employer,check that the proposed items are suitable 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 to help 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 employees tax code for that year

Consider all PSA applications positively and if an application meets the statutory requirements an agreement can be set up.

However, an employer is not have entitled to a PSA, and you may refuse to enter into an 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 the guidance in PSA2030.