If you`re an employer who offers client entertainment, you may be familiar with the Pay As You Earn (PAYE) Settlement Agreement (PSA) process. Essentially, a PSA is an agreement between an employer and HM Revenue and Customs (HMRC) that allows the employer to pay tax on behalf of their employees for certain expenses or benefits.
One area where a PSA can be particularly useful is for client entertainment. If you regularly treat clients to meals, tickets to events, or other forms of entertainment, it can be challenging to keep track of the tax implications for each individual employee. A PSA simplifies this process by allowing you to pay the tax on behalf of all employees in one lump sum.
So, what exactly is covered under a client entertainment PSA? In general, any expenses related to client entertainment that exceed HMRC`s annual limit of £150 per client (including VAT) can be included. This can include meals, drinks, tickets for events, and other forms of entertainment.
It`s important to note that not all client entertainment expenses can be included in a PSA. For example, costs related to travel or accommodation for clients cannot be covered, nor can expenses related to gifts or prizes.
To use a PSA for client entertainment expenses, you will need to apply to HMRC and agree on a suitable payment plan. Once this is set up, you will be able to include all relevant expenses in the agreement. You will need to keep detailed records of all client entertainment expenses throughout the year and submit them to HMRC before the PSA deadline.
One of the benefits of using a PSA for client entertainment is that it can help to simplify your tax reporting and reduce the administrative burden of managing individual tax calculations for each employee. It can also help to ensure that all tax obligations are met and reduce the risk of penalties for non-compliance.
In summary, if you offer client entertainment as part of your business activities, a PAYE Settlement Agreement can be a useful tool for simplifying your tax reporting and managing your tax obligations. By including all relevant client entertainment expenses in the agreement, you can ensure that your tax affairs are in order and reduce the risk of penalties for non-compliance. Be sure to consult with a tax advisor or HMRC to learn more about how to apply for a PSA and ensure that your client entertainment expenses are managed appropriately.