HMRC have launched a consultation Simplifying the PAYE Settlement Agreement (PSA) process which sets our several proposals to simplify agreeing and reporting items in a PSA.

In the consultation document HMRC acknowledge that, whilst the popularity of PSAs has increased greatly since their introduction in the 1990s, the process has not kept up with demand or changes in working practices. 

They are therefore seeking views on proposals to:

  • Make the process simpler for both employers and HMRC, and
  • Provide greater clarity on what can and cannot be included in a PSA.

Proposals for the new PSA process include:

  • Removing the requirement for upfront agreements: employers would instead self-assess what to include.
  • A digital solution which could include
    • replacing the paper return with an online one
    • requiring more frequent submissions (possibly in line with PAYE reporting)
    • bringing payment and calculation dates forward to align with the P11D deadlines.
  • Handling differences of opinion:
    • employers would receive a  warning where they make a mistake in good faith,
    • HMRC would only take action if they then continued to make the same or similar mistakes.

HMRC are not currently proposing to extend the scope of what can and cannot be included in a PSA.  They have also rejected the suggestion of the Office of Tax Simplification (OTS) of a list of items.  Instead they propose to:

  • Remove the ‘minor’ condition following the introduction of the trivial benefits rules.
  • Provide more guidance on the ‘irregular’ and ‘impracticable’ criteria.
  • Consider a cap / exemption for office holders.

Comments are invited on the proposals up to 18 October 2016.


Consultation document: Simplifying the PAYE Settlement Agreement (PSA) process