Call for evidence on PAYE Settlement Agreements (PSAs)

PAYE Settlement Agreements (PSAs) allow employers to settle the Income Tax and Class 1B National Insurance Contributions (NICs) due on certain benefits and expenses on behalf of employees, instead of reporting them through payroll or on a P11D.

The government is seeking detailed feedback on how employers decide what to include in a PSA, how the rules are interpreted, and whether the current framework remains fit for purpose. 

The call for evidence focuses on the practical operation of PSAs rather than the underlying tax rules for benefits and expenses. HMRC want to understand:

• How organisations determine whether an item is minor, irregular or impracticable to report through standard PAYE routes.
• How PSAs interact with other reporting mechanisms, including payrolling benefits and P11D reporting.
• How employers apply the existing rules in real-world scenarios and where uncertainty or inconsistency arises. 

The government emphasises that PSAs are intended for items where it is genuinely difficult to identify the precise value attributable to each employee. 

• Where both the recipient and the cost are clear, HMRC consider that standard PAYE reporting should be used instead.

To illustrate the intended boundaries, HMRC provides examples:

• Potentially suitable for PSAs:
  • Catering at large staff events where individual consumption cannot be measured.
  • Shared transport after work events where costs cannot be reliably allocated per employee.
• Not suitable for PSAs:
  • Private medical insurance, where the cost per employee is known.
  • Chauffeur-driven cars provided to named individuals.
  • Employer-provided loans, where the benefit is clearly attributable.

These examples are not exhaustive but are intended to highlight the principle that PSAs should only be used where reporting through normal processes is impracticable.

HMRC are seeking evidence on how PSAs are managed, including:

• The time and resources required to establish, amend and maintain PSA contracts.
• How employers handle annual PSA calculations, including gross-up methodologies and allocation across tax bands.
• Whether the current contract-based system remains appropriate, or whether a more flexible, criteria-based election could reduce administrative burdens.

Some stakeholders have suggested that a definitive list of PSA-eligible items would improve consistency.

• HMRC are asking whether this would be helpful or whether it risks being too rigid for diverse business models.

The call for evidence also explores whether PSA rules affect employers differently depending on size, sector or workforce structure. HMRC are particularly interested in:

• Whether SMEs face disproportionate administrative burdens.
• Whether certain sectors rely more heavily on PSAs due to operational patterns, e.g. hospitality, retail and events-based industries.
• What mitigations or reforms could ensure fairness across employer type.

This call for evidence is intended to be the main mechanism for gathering views on PSA operation.

• HMRC may follow up with respondents if clarification is needed.
• A summary of responses will be published later in the year.

The consultation closes on 15 September 2026. Responses can be made by email or by post. 

Useful guides on this topic

PAYE Settlement Agreements
What are PAYE Settlement Agreements? How do they work? What can be included?  

External link

Call for evidence: PAYE Settlement Agreements (PSAs)

Question 1: What type of organisation are you (select one):

• Employer.
• Agent.
• Payroll provider.
• Representative body.
• Software provider.
• Other (please specify).

Question 2: Organisation size or client base (select one):

If you are an employer:

• Micro (fewer than 10 employees).
• Small (10 to 49 employees).
• Medium (50 to 249 employees).
• Large (250+ employees).
• Group or multi-entity organisation

If you are an agent, payroll provider, or representative body, approximate the number of employer clients you support with PSA related services:

• One to 10.
• 11 to 50.
• 51 to 250.
• 250+.

Question 3: Sectors (select all that apply):

• Public sector.
• Private sector.
• Charity or third sector.
• Financial services.
• Retail.
• Hospitality.
• Manufacturing.
• Professional services.
• Technology or digital.
• Health and social care.
• Education.
• Other (please specify).

Question 4: Your role in PSA reporting or processing (select all that apply):

• Authorising officer.
• Payroll lead.
• Finance lead.
• Tax lead.
• Agent.
• Adviser or consultant.
• Other (please specify).

Question 5: Do you currently have a PSA agreement with HMRC?

• Yes - active.
• Yes - but nil return.
• No - previously had.
• No - never had.

If yes, how many years has the current PSA been in place?

Question 6: Over the past five years, how have the volume or types of expenses and benefits included in your PSA changed? Please describe the key drivers behind any changes, such as developments in business operations, workforce patterns, administrative systems, costs, guidance, or HMRC engagement.

Question 7: How clear do you find the boundary between benefits that can be treated as trivial benefits and those that can be included in a PSA?

Question 8: When a benefit cannot be treated as a trivial benefit, which aspects of the rules most commonly lead you to conclude that? For example, is it the £50 limit, the type of benefit or the reason it is being given?

Question 9: How do you decide whether a benefit or expense should be reported through a PSA rather than the standard PAYE reporting routes? This may include consideration of whether items are minor, irregular, or impracticable to report, as well as any operational, data, timing, system, or organisational barriers, and their scale where possible.

Question 10: Could you include examples of where timings work well and where they create challenges? This may include experiences of adding or removing items, dealing with HMRC reviews or queries, and managing PSAs across years where benefits vary.

Question 11: What time, resources or costs are involved for your organisation in establishing a new PSA or amending an existing PSA? Where relevant, describe the main activities involved (for example, identifying benefits, using advisers, or engaging with HMRC), and whether these tend to be one-off or recurring.

Question 12: Some stakeholders have told HMRC that a definitive list of what can be included in PSAs would be helpful. Would this support more consistent application of the rules? Please explain why or why not.

Question 13: What time, resources or costs are involved in operating the annual PSA calculation and submission cycle?

Question 14: Are there aspects of the current PSA contract arrangements, amendment process or calculations that could benefit from change? If so, which aspects, and why?

Question 15: Can you think of an alternative approach without a contract to better support compliance and reduce administrative burdens? For example, would a system be practical where an employer elects to apply the PSA rules, where certain criteria are met and makes a declaration of compliance when submitting calculations?

Question 16: Describe the approach you use, and the factors you consider, when providing a minor, irregular or impractical to report benefit to an employee who does not have an employment income tax liability.

Question 17: Are there any specific circumstances where you consider that HMRC’s approach to applying the first chargeable rate of income tax to PSA items does not work as intended? If so, please describe the circumstances and explain why.

Question 18: Where a single category of benefits is provided to employees in different tax bands (for example, basic, higher, additional, Scottish or Welsh rates), how are those items allocated across the relevant bands? What method do you use in practice?

Question 19: What gross-up methodology do you apply? For example, do you apply a single gross-up rate across all items (such as using the highest applicable marginal tax rate), or do you apply different gross-up rates for different groups of employees based on their tax bands? Please describe your approach, including any assumptions or calculations you rely on.

Question 20: How do you approach PSA calculations in cases where an employee has no PAYE income tax liability arising from employment with this employer? Please describe the approach you use and the factors you consider.

Question 21: What types of HMRC guidance or worked examples do you find most useful in helping you prepare PSA calculations?

Question 22: Based on your experience or professional perspective, do the impacts of PSA policy, rules, or processes differ between SMEs and large employers, or for specific workforce groups? Please include any examples or evidence.

Question 23: Do you have any additional comments or insights on PSAs, including experiences or considerations not covered by the questions above that you would like to share?

Question 24: If necessary, would you be willing to be contacted for limited follow-up to clarify specific aspects of your response?

• Yes.
• No.

If yes, please provide contact details.