The introduction of Enhanced Reporting Requirements on 1 January 2024 has resulted in increased scrutiny of the taxability of employee benefits and expenses, writes Jillian O’Sullivan
We have seen a shift in Revenue focus during PAYE interventions not only to matters within scope of Enhanced Reporting Requirements (ERR) reporting but also to staff entertainment. It is, therefore, critical that employers now consider whether they are required to submit a PAYE Settlement Agreement (PSA) application before 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 that have 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?
Many employers 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 that 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.
Deadlines
A written application must be submitted to Revenue by 31 December 2024 for the PAYE year 2024. Taxes due under the agreement must then be paid over by 23 January 2025.
Included PSA items
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 and prizes; and
- Staff gifts where the small benefit exemption has otherwise been utilised, e.g. wedding, birthday, baby, Easter and Christmas gifts.
Get proactive
With the increasing scrutiny by Revenue on payroll tax compliance, it is essential for employers to proactively assess their obligations regarding PSA.
Ensuring that all taxable employee benefits and expenses, including staff entertainment and gifts, are accounted for can help avoid potential penalties and maintain good standing with Revenue.
The 31 December deadline for PSA applications for the 2024 PAYE year is a critical date that employers should not overlook.
By meeting these requirements and preparing well in advance, businesses can streamline their tax processes, reduce administrative burdens, and foster a compliant and transparent work environment.
Jillian O’Sullivan is Corporate Compliance Partner at Grant Thornton
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