PAYA compensation agreements (PAYA) are often used by employers to maintain compliance with employee cost and social benefits procedures. By entering into this formal agreement, an employer can pay any tax due on expenses and benefits to workers through an annual submission and payment to the HMRC. To manage their resources, HMRC requests calculations that are submitted annually until a specified date that may differ by agreement, but which is usually July 31 or August 31. It is interesting to note, however, that there is no legal time limit for submitting calculations, so no penalty can be imposed for not presenting your calculation until that date. From April 2018, the annual process for renewing PPE contracts has been simplified, so employers are not required to agree to a PSA with HMRC each year if the categories remain the same. Under the agreement, the EPI will remain in place until the employer or HMRC terminates or amends it. For example, the total cost of providing a $100 PSA gift to a 40% taxpayer is about $190. Before the partial decentralisation of income tax in Scotland in April 2016, there was no need for individual calculations or precise figures – suffice it to say, for example, that a $300,000 benefit had been granted and that about 20% of beneficiaries were taxpayers with a higher tax rate, the rest being the basic rate. This was a relatively simple way for employers to pay on what was due and proved to be a success in obtaining income. If an employer is sure that it does not have employees who are Scottish or Welsh taxpayers (see below), this is maintained. If you don`t have a PSA agreement yet, our team of labour tax specialists can help you set up and contact HMRC to make sure the agreement contains everything you want to include now and in the future.
You must agree with HMRC on the type of expenses and benefits you wish to include in the PPE before the annual deadline. If HMRC accepts the application, you submit to HMRC a calculation of the tax and NIC due on a gross basis at the corresponding tax rate and you pay the amount owed. The instruction of the employers` bulletin is to identify workers on the basis of their tax code; In other words, Scottish taxpayers are characterized by an S prefix and Welsh by a prefix C (Cymru). This means that employers must monitor the provision of all in-kind benefits provided for the inclusion of PPE by the court at the beginning of each tax year and identify all workers in that jurisdiction according to tax brackets. Different PSA1 forms are available for each jurisdiction to be completed online. With regard to the partial decentralisation of income tax in Scotland, Scotland now has powers over Scottish income tax rates and ranges under the Employment Act 1998, amended by the Scotland Act 2016. The Wales Act 2014 provides powers over Welsh income tax rates. Income tax in Scotland and Wales is levied on income defined as “non-savings, non-dividend-related” income; Overall, this includes employment income, earnings from self-employment, retirement income and income from property received by persons classified as Scottish or Welsh tax payers in a tax year.
If you do not have an PPE yet and miss this deadline, it is possible to make a voluntary disclosure and a tally of items that you would otherwise have included in an EPI.