PAYE Settlement Agreement Application
Step 1: The first step is writing to Business Tax Operations at HM Revenue and Customs (HMRC).
You would need to describe which of the expenses and benefits you want a PAYE Settlement Agreement to cover.
Step 2: They will need to agree on what it can include. Following that, you would get two (2) draft copies of form P626 sent to you by mail. You need to sign both copies and return them to the PSA team.
HM Revenue and Customs would then authorise the request and send another form back to you. This form will be the actual Pay As You Earn Settlement Agreement from HM Revenue and Customs.
Step 3: HMRC may not include all the items you asked for in your PSA. If not, you would need to use form P11D to make a separate report for anything not included.
Using payroll to pay employee expense payments and benefits means you do not need to submit the P11D form.
Step 4: Use ‘Form PSA1‘ to work out and notify HMRC the value of items included in your PSA. Otherwise, HMRC would calculate the amount and you would get charged more.
Step 5: Send form PSA1 to HM Revenue and Customs without delay when the tax year ends. They will contact you before the 19th of October following the tax year covered by the PSA. HMRC will then confirm the total tax payable and how much National Insurance you would need to pay.
Business Tax Operations PSA Team
Benton Park View
Note: If you use an agent, make sure they have authorisation to make a PSA on your behalf (e.g. a signed letter of authority).
Renew a PSA for 2022/23 Tax Year
HMRC send out new PSAs before April for use in the current tax year. Check if there have been any changes since the PSA got issued for the previous tax year. If not, the only thing you will need to do will be to sign the new agreement.
You will then have your PSA in place for use during the appropriate tax year. HM Revenue and Customs will not send a new PSA and it will not need renewing.
Note: The HMRC agreement continues until either they cancel it or you need to change or cancel a PSA yourself. You can contact the HMRC employer helpline for further advice on getting and calculating a PSA.
ALSO IN THIS SECTION
What’s Included in a PSA | Minor, irregular, or impracticable items that can count for HMRC agreements.
Deadlines and Payment | The date HMRC approves any agreements determines how to report the items.