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Simplifying PAYE Settlement Agreements

Simplifying PAYE Settlement Agreements

KPMG's response to HMRC’s recent consultation is summarised below.

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The draft regulations

HMRC published draft regulations for consultation on 6 February 2018 which are intended to implement the Government’s decisions on simplifying the PAYE Settlement Agreements (PSA) process. When in force, these regulations will remove the requirement to agree a PSA on an annual basis.Instead, employers and HMRC will enter into an ‘enduring agreement’, which will remain in effect until varied by agreement or cancelled.The draft regulations also facilitate future digitisation of the PSA process, though HMRC has confirmed there are no immediate plans to move to an electronic system.These changes will come into effect from 6 April 2018.

KPMG's comments

We welcome introduction of the ‘enduring agreement’ approach, which should reduce the burdens placed on employers by the requirement to agree PSAs annually. 

Rather than specifying individual items that are included in a PSA, we recommend that the ‘enduring agreement’ be worded in general terms to cover all expenses and benefits considered minor, irregular or impractical to report in line with HMRC’s guidance. This should prevent the advantages of the new approach being reduced by benefits provided, or expenses met, by employers on a ‘one off’ basis requiring formal variations to the PSA to be agreed from year to year.

In our view, digitisation is the natural next step to reduce further the administrative burden on businesses and HMRC.  Additionally, we consider that moving to an electronic process has the potential to reduce the risk of error.  Whilst some employers will be disappointed that digitisation has been deferred, the changes to allow this in the future are welcome.  

We encourage HMRC to keep future digitisation under active review, and engage further with stakeholders on implementation once the new PSA is well established.

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