The deadline for filing a PAYE Settlement Agreement (PSA) application with Revenue for the 2024 tax year is 31 December 2024.
A PSA is a practical way of enabling employers to settle the income tax, USC and PRSI on minor taxable benefits provided to employees (for example, items not covered by the small benefit exemption) without the requirement to account for these taxable benefits through the normal PAYE process. The employee therefore enjoys the benefit without having to be concerned about a subsequent tax liability.
In advance of the 31 December deadline, it is therefore vital that employers consider whether they have a requirement to submit a PAYE Settlement Agreement (PSA) application to account for taxes due on taxable employee benefits and expenses which have not been accounted for via the PAYE system during the year.
The PSA, together with payment of the corresponding tax liability, must be submitted to Revenue no later than 23 January of the following year. E.g. for the 2024 tax year, the submission and payment must be made by 23 January 2025.
In calculating the taxes due on these benefits, the employer must treat the value of the benefit as an after-tax amount received by the employee and then re-gross this value based on the employee’s marginal tax rate for the year in question. Employer PRSI must also be calculated on the re-grossed amount.
The total taxes due and PSA submission can be processed via the Revenue On-line System (ROS).
Historically, Revenue only required the PSA submission post-year end to provide details on an aggregate basis (as opposed to employee by employee), namely, the aggregate amount of the qualifying emoluments, the total number of employees in receipt of these emoluments and the taxes due on a grossed-up basis. However, in recent years, there has been a noticeable increase in Revenue activity on PSA submissions seeking more granular detail on the benefits provided. We fully expect this approach to continue.
There has been a significant increase in Revenue PAYE compliance checks over the last 18 months, with minor and irregular benefits being a feature of these reviews. The PSA process provides employers with the opportunity to carry out a full in year review of benefits that may not have been processed through payroll but may meet the qualifying criteria for inclusion on a PSA. This approach is a very effective simplification of the expenses and benefits processes enabling employers to reduce reporting requirements, ensure payroll tax compliance is managed appropriately and help with employee reward.
We can help with application and calculation processes. Still, more importantly, our tax experts can help you understand the extent to which exemptions may apply and the conditions that need to be applied.
We can help with the application and calculation processes. Still, more importantly, our tax experts can help you understand the extent to which exemptions may apply and the conditions that need to be met, so that your budget for staff incentives and entertainment is expensed in the most tax efficient manner.
A PSA is a practical way of enabling employers to settle the income tax, USC and PRSI on minor taxable benefits provided to employees (for example, items not covered by the small benefit exemption) without the requirement to account for these taxable benefits through the normal PAYE process. The employee therefore enjoys the benefit without having to be concerned about a subsequent tax liability.
Enhanced Revenue Reporting (ERR)
Enhanced Revenue Reporting requirements (ERR), which have been in effect since 1 January 2024, require employers to report details of certain employee benefits and expenses in real time. This has provided Revenue with significant visibility over employee benefits and has highlighted the taxability of suchitems, including staff entertainment. This has resulted in increased scrutiny of these items in the course of Revenue PAYE interventions.In advance of the 31 December deadline, it is therefore vital that employers consider whether they have a requirement to submit a PAYE Settlement Agreement (PSA) application to account for taxes due on taxable employee benefits and expenses which have not been accounted for via the PAYE system during the year.
How does the PSA process work?
In order to avail of a PSA, an application must be filed with Revenue by 31 December of the same year. E.g. for the 2024 tax year, the application must be filed with Revenue no later than 31 December 2024.The PSA, together with payment of the corresponding tax liability, must be submitted to Revenue no later than 23 January of the following year. E.g. for the 2024 tax year, the submission and payment must be made by 23 January 2025.
In calculating the taxes due on these benefits, the employer must treat the value of the benefit as an after-tax amount received by the employee and then re-gross this value based on the employee’s marginal tax rate for the year in question. Employer PRSI must also be calculated on the re-grossed amount.
The total taxes due and PSA submission can be processed via the Revenue On-line System (ROS).
Historically, Revenue only required the PSA submission post-year end to provide details on an aggregate basis (as opposed to employee by employee), namely, the aggregate amount of the qualifying emoluments, the total number of employees in receipt of these emoluments and the taxes due on a grossed-up basis. However, in recent years, there has been a noticeable increase in Revenue activity on PSA submissions seeking more granular detail on the benefits provided. We fully expect this approach to continue.
What benefits qualify?
The employer may avail of a PSA to remit the taxes arising on benefits that meet all of the following criteria:- The emolument must be a non-cash benefit.
- The benefit must be minor in nature and amount, and
- irregular with regard to the frequency the benefit is provided.
How can BDO Help?
There has been a significant increase in Revenue PAYE compliance checks over the last 18 months, with minor and irregular benefits being a feature of these reviews. The PSA process provides employers with the opportunity to carry out a full in year review of benefits that may not have been processed through payroll but may meet the qualifying criteria for inclusion on a PSA. This approach is a very effective simplification of the expenses and benefits processes enabling employers to reduce reporting requirements, ensure payroll tax compliance is managed appropriately and help with employee reward.We can help with application and calculation processes. Still, more importantly, our tax experts can help you understand the extent to which exemptions may apply and the conditions that need to be applied.
We can help with the application and calculation processes. Still, more importantly, our tax experts can help you understand the extent to which exemptions may apply and the conditions that need to be met, so that your budget for staff incentives and entertainment is expensed in the most tax efficient manner.