OTS Review of Expenses and Benefits – PSAs

After Budget 2014 on 19 March, David Gauke wrote to the Office of Tax Simplification (OTS) saying that most of their recommendations were being actioned or taken forward.  Some of the things that we are looking forward to are the consultations planned for 2014:

1. Voluntary payrolling of benefits
2. Abolition of the £8,500 threshold
3. A trivial benefits exemption, and
4. A general exemption for non-taxable benefits

In his letter, Mr Gauke said that the OTS proposal to widen the scope of the PSA and allow employers to settle any tax liability on behalf of the employee was ‘not consistent with the purpose of the PSA’.

In response on 15 April 2014, OTS Chairman Rt Hon Michael Jack and Tax Director John Whiting have expressed their disappointment that this ‘Quick Win’ was not accepted.  After all, they said, widening the scope of the PSA was near the top of employers’ list for changes that would simplify payroll administration – which was the idea of the review in the first place.  They have revised their recommendation in light of Mr Gauke’s rebuff to say that the OTS still believes that the scope of the PSA needs to be widened along the lines of the following:

• The PSA guidance from HMRC should state what cannot be included in a PSA rather than the current list of allowable items which the OTS says is ‘restrictive’
• The requirement for pre-approval could be removed or streamlines, with the effect that PSAs could be used for a ‘tidying-up’ exercise after the end of the tax year

CommentThe OTS said that they were planning to publish reports in the summer of 2014 on two other areas that cause issues for employers – accommodation benefits and termination payments.  This area of simplification cannot come soon enough and we look forward to these reports. We are also looking forward to John Whiting speaking at our Conference on 12 June in London.  All of the work that the OTS have been doing in this complicated and time-consuming area of payroll administration looks set to be achieving the goal of simplification and we will enjoy what he has to say.

Further Information

• Gov.UK – David Gauke to the OTS (19 March 2014 letter)
• Gov.UK  – OTS to David Gauke (15 April letter)