More Making Tax Digital for Business (MTDfB) webinars

6 Jul 2017

These proposals included:

Removing the requirement to agree the items in a PSA with HMRC;

Introducing a digital PSA return process;

Aligning the PSA payment date with the Class 1A NICs payment deadline;

Removal of ‚ minor‚ from the PSA criteria; and

New guidance on interpreting the ‚ irregular‚ and ‚ impracticable‚ categories.

In response, the CIOT has expressed disappointment that the government is not considering whether to widen the scope of PSAs but is, instead, potentially proposing to narrow their scope. PSAs provide employers with the flexibility to pay tax and NICs on items that would be administratively difficult to process through PAYE or include on a P11D.

We agree that the government‚ s proposed new PSA process, which removes the requirement to agree the items in a PSA with HMRC in advance of making the PSA return, represents a real simplification but make the point that a process will still be required for employers to discuss with HMRC whether certain items can or cannot be included in a PSA where this is not clear from published guidance.

We agree that giving a warning to employers where an item has been included in a PSA in error rather than immediately penalising the employer would be fair and proportionate. We suggest that this encompasses all items wrongly included, for whatever reason, rather than just ‚ good faith‚ errors.

We agree that a digital return option for submitting the PSA return should be introduced, subject to consultation as to how this process would work and the retention of a paper process for those employers that are unable, for whatever reason, to file electronically.

We do not, however, believe that the PSA return and payment deadlines should be aligned with that of the P11D process (i.e. a deadline of 6 July following the end of the tax year) as this would place too much of a burden on employers‚ staff resources in too short a time frame.

We do not agree with the proposal to remove ‚ minor‚ BIKs from the PSA criteria because of the new ‚ trivial‚ BIK exemption. There are items which are ‚ minor‚ which would not fall within the ‚ trivial‚ BIK exemption. For example, one of the conditions in the trivial BIKs exemption is that the benefit is not provided in recognition of ‚ particular‚ services. If it is then the BIK is taxable as it does not meet the requirements of the trivial BIK exemption.

While it would be helpful for HMRC to provide in guidance some principles and examples as to how ‚ irregular‚ should be interpreted we do not agree with the proposal to exclude all contractual items from the scope of the ‚ irregular‚ category. For example, removing all ‚ contractual‚ items from PSAs would potentially mean that items such as relocation costs, late night taxis and tax return preparation fees, e.g. for international assignees, would fall outside the scope of PSAs as usually the employer will have agreed contractually to pay for such items.

We consider that HMRC guidance on what is/is not considered to meet the ‚ impracticable‚ criteria would make it easier for employers to decide whether the criteria is satisfied.

We do not think that there should be an exception or cap in respect of office holders, nor that any new safeguards are needed to prevent abuse of PSAs.

Finally, we highlight the success of PSAs since they were introduced and recommend that the government builds on that success by widening, not narrowing, the scope of PSAs.

The government‚ s response is expected later this year.

Technical Team