Dealing With PAYE Settlement Agreements: Entering into a PSA
When you and the employer have agreed the proposed PSA, the Regulations require the details are set out in writing. A form P626 should be used for that purpose.
Take the following action
- complete form P626
- set out the specific items to be covered, for example, occasional use of a company holiday flat
- send two copies of the P626 to the employer
- ask the employer to sign and return both copies
- create an ECS/PSA record to show the proposed items see PSA6020.
P626 returned by employer
On receipt of the signed P626 from the employer
- both copies of the form should be signed by the PSA Authorising Officer.
- the Authorising Officer must be an Officer or above
- return one copy of the form to the employer with a covering letter confirming that the agreement is in place
notify the employer of the date by which the following details must be provided
- the value of the items included in the PSA on which tax and Class 1B NICs is chargeable
- the total number of employees in receipt of each specified amount
- the number of those employees chargeable to each specified rate of tax
- a computation of tax and Class 1B NICs calculated. You should enclose the form PSA1 for the employer to use.
- keep the remaining copy in the employer’s file
- BF your records to be reviewed at the notified date
update the ECS record to show
- which items have been included or rejected, and
- the date the P626 signed by the Authorised Officer was sent back to the employer, see PSA6030
Calculation returned by employer
On receipt of a calculation from the employer follow the guidance at PSA2040
If no reply is received by the notified date
- contact the employer to remind them what details are required, review the case after one month
- if there is no reply after one reminder you must consider making a formal determination under Regulation 110 based on estimated figures, follow the guidance at PSA4020 onwards.
P626 not returned by employer
If you do not receive the signed P626 from the employer before the 6 July following the end of the first tax year to which it applies, no PSA will exist.
The employer must operate PAYE as normal on all relevant payments and taxable expenses for that tax year and return any benefits on form P11D or payroll them and submit a P11D(b) as required.
Appropriate penalties should be considered if
- there is a failure to submit the appropriate returns, or
- for submitting incorrect returns.