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What is a PSA?

A PSA stands for PAYE Settlement Agreement and comes into play when a company is looking to settle a benefit in kind with HMRC for employee entertainment, for example, the annual Christmas party.

If firms didn't use this scheme, it would mean allocating a benefit in kind to each employee, having to declare it on an individual P11D per employee and ultimately changing their PAYE code the following year.

All that needs to be done under at PSA is work out how many basic rate and higher rate taxpayers were involved, then the employer grosses up the value, adds on the ‘Class 1B’ employer national insurance contributions, and pays the money to HMRC.

The deadline for paying up is technically 19 October but large businesses are given a three day grace period when they pay online as long as the money is in HMRC's account by close of business Monday.