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UK Accountants Welcome Benefit-In-Kind Tax Simplifications

by Jason Gorringe,, London

08 March 2018

The Association of Taxation Technicians (ATT) in the UK has welcomed the tax agency's proposal to simplify PAYE Settlement Agreements (PSAs), which simplify the taxation of some benefits-in-kind for employers and allow employees to receive those benefits free of tax.

The ATT urged that clear guidance is needed on the changes, which are expected to take effect in a month's time.

Unless a benefit qualifies as "trivial" or is the subject of a specific exemption, employees and employers usually need to pay tax on benefits-in-kind provided by the employer.

Where the benefit is taxable but is minor, irregular, or difficult to quantify, the employer can enter into a PSA with HMRC. This provides an administrative simplification for the employer and, since the employer then pays all of the tax relating to the benefit, means that the employee can enjoy the benefit free of tax.

The ATT expects this simplification will encourage more employers to use this route to deal with eligible benefits-in-kind, such as prizes, incentives or awards, staff entertaining, gym subscriptions, and small gifts not otherwise covered by an exemption.

According to the ATT, employers must renew their PSA with HMRC each year. That requirement is to be removed from April 2018, creating an indefinite arrangement.

Yvette Nunn, Co-chair of ATT's Technical Steering Group, said: "We welcome the creation of an enduring agreement so that employers do not need to renew their PAYE Settlement Agreements (PSAs) annually. This is a sensible measure which we hope will encourage more employers to use this route to deal with eligible benefits-in-kind. We would like to see more detail on how the changes will work in practice. We call on HMRC to issue clear guidance as soon as possible on the process for application, variation, and cessation of enduring agreements."

The ATT has, however, expressed concerns about provisions in the draft legislation concerning the cancellation of a PSA agreement – for instance, where the employer has seriously or persistently failed:

  • to account to HMRC for sums for which the employer is accountable under the PSA, or otherwise to comply with the terms of the PSA;
  • to produce records in accordance with regulation 117 (inspection of PSA records);
  • to deduct or account for tax in accordance with Parts 3 and 4 of the PSA (deduction and repayment of tax; payments, returns, and information); or
  • to deliver returns in accordance with Parts 3 and 4 of the PSA.

Nunn said: "The new draft regulations appear to give HMRC the right to cancel for any reason. Given the nature of the benefits covered by this procedure, if a PSA is cancelled by HMRC without a good reason, the costs to the employer of reporting the benefits in the ordinary manner is likely to be disproportionate to the amount of tax collected. We do not wish to see the protections for an employer in these circumstances downgraded to HMRC guidance, which does not have the force of law."

"We would very much like HMRC to bring forward the introduction of a digital solution to preparing and submitting PSAs. We think that could provide significant time savings for employers and HMRC. However, we appreciate that HMRC has to focus its resources on the areas that will give it the greatest return on investment. One simple step which we have asked HMRC to consider in the meantime is the provision of an email address for employers and agents to send the PSA applications, variations and computations. Currently these must all be printed out and submitted by post."

TAGS: tax | investment | law | employees | United Kingdom | agreements | legislation | regulation | Tax

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