PSA1120 - Overview of PAYE Settlement Agreements: Employer record keeping

Once a PSA is agreed (by HMRC receiving the signed P626) the employer is no longer required to

• operate PAYE or pay Class 1/1A NICs on the benefits and expenses in the PSA, or
• include those benefits and expenses on forms P11D and P11D(b).

However the employer must still retain suitable records of what has been provided or paid.

Items which can easily be attributed to individual employees

Where items can easily be attributed to individual employees the employer must;

• retain the same records required for the completion of form P11D
• record details of cash payments to individual employees.

Items which cannot be attributed to individual employees

Where it is impracticable to allocate an item between employees, a record of the employees concerned will not be needed. Instead the employer should record information about;

• the overall cost of providing the benefits concerned (for example the total cost of providing a party which a number of employees attend)
• the number of employees, and
• representative samples of the tax rates of the employees involved.

Keeping Records

The Income Tax (Pay As You Earn) Regulations 2003 state that employers must keep records relating to PSAs for not less than 3 years after the end of the most recent tax year to which they relate. You must ensure that employers who have a PSA are aware of what records to keep and how long they must keep them.