The introduction of Enhanced Reporting Requirements (ERR) on 1 January 2024 has resulted in increased scrutiny on the taxability of employee benefits and expenses.
We have seen a shift in Revenue focus during PAYE interventions to not only matters within scope of ERR reporting but also to staff entertainment. It is therefore critical that employers now consider whether they have a requirement to submit a PAYE Settlement Agreement (PSA) application in advance of the 31 December deadline.
This process enables employers to account for income tax, Universal Social Charge (USC) and PRSI due on taxable employee benefits and expenses which has not been accounted for via the PAYE system during the year, to ensure payroll tax compliance is managed appropriately.
What is a PAYE Settlement Agreement (PSA)?
Many employers often provide benefits and expenses to employees, such as staff entertainment, vouchers and other gifts. Unless these benefits and expenses fall within the terms of specific tax exemptions or Revenue concessions, they are liable to payroll taxes on a real time basis.
PSAs are an administrative arrangement which allows employers to pay taxes on behalf of their employees on benefits and expenses that are ‘minor and irregular’ in nature in one annual settlement on a grossed-up basis.
What are the deadlines?
A written application must be submitted to Revenue by 31 December 2024 with respect to the PAYE year 2024. Taxes due under the agreement must then be paid over by 23 January 2025.
What items are included in PSAs?
The benefits or expenses to be included must be non-cash, minor in nature and amount and irregular with regard to the frequency the benefits or expenses are provided. Examples of taxable items that could be included in a PSA are:
- Staff entertainment
- Staff lunches/drinks/meals
- Staff awards
- Staff prizes
- Staff gifts where the small benefit exemption has otherwise been utilised e.g. wedding, birthday, baby, Easter, Christmas gifts.
How can we help?
The PSA process provides employers with the opportunity to carry out a full review of benefits and expenses in advance of year end to identify taxable benefits and expenses that have not been accounted for via the PAYE system but that meet the criteria for inclusion on a PSA. We can assist employers with the following:
- Tax advice on the application of specific tax exemptions and Revenue concessions to employee benefits and expenses;
- Reviewing expenses and benefits to identify expenses that should be included in a PSA;
- PSA application process; and
- Preparation of income tax, USC and PRSI calculations for submission to Revenue.
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