HMRC’s PAYE Settlement Agreements call for evidence closes on 15 September 2026. It is not a technical curiosity for payroll teams. It sits beside the already-published plan for mandatory payrolling of benefits in kind from April 2027. Together they redraw how employers report, settle and govern employee benefits. If your PSA is still a once-a-year spreadsheet owned by “whoever did it last year,” you are flying blind into a regime change.
Primary sources: the call for evidence landing page, the full PSA document and questions, HMRC’s PAYE Settlement Agreements guidance, the April 2027 BIK reporting package (including draft regulations), statutory framework under ITEPA 2003 ss.703–705, and practitioner notes from KPMG, ATT and Ross Martin.
What a PSA actually is — and what it is not
A PAYE Settlement Agreement is a voluntary arrangement that lets the employer settle income tax and Class 1B NICs on certain expenses and benefits instead of putting them through payroll or P11D. The classic gate is that items must be minor, irregular or impracticable to allocate to named individuals. Staff buffet lunches where consumption cannot be measured, and shared post-event taxis charged per journey rather than per head, are the examples HMRC now uses in the call for evidence. Named medical cover, a chauffeur car for one executive, and a beneficial loan to a single employee are the counter-examples HMRC says should stay on the standard route.
That boundary is the whole game. PSAs are not a dumping ground for anything awkward. They are a settlement route for items where the employer cannot, in practice, put a clean value against a clean employee ID. Where both the person and the cost are clear, HMRC’s working assumption is P11D or payrolling — not PSA.
Why the call for evidence matters to CFOs
HMRC is not, on its face, rewriting the tax base for benefits. The call for evidence is explicit: it is about how PSAs are used, how employers decide what goes in, how calculations and contracts work, and whether the framework is clear, consistent and fair. Responses close 15 September 2026. A summary is due later in the year.
Read that as a compliance redesign signal. When HMRC asks whether a definitive list of includable items would help, whether the contract model still works, and whether an election-plus-declaration model would be cleaner, they are stress-testing the administrative architecture. Boards that stay silent will live with whatever default emerges. Boards that respond with real data — volume trends, system friction, multi-entity pain, gross-up methodology, interaction with Scottish/Welsh rates — shape the next guidance cycle.
The questions that should land on a CFO desk, not just payroll:
- Has the mix of PSA items shifted over five years because of hybrid working, events, recognition awards or vendor platforms?
- Where is the real boundary between trivial benefits, PSA items and standard BIK reporting in your group policy?
- What does the annual calculation actually cost in time, adviser fees and rework after HMRC queries?
- How do you gross up — single highest rate, banded allocation, or something looser that would not survive a review?
- What happens to your PSA inventory when Phase 1 mandatory payrolling starts in April 2027?
Mandatory payrolling from April 2027 — the second half of the same problem
From 6 April 2027, HMRC will require real-time payrolling for:
- company cars and car fuel
- vans and van fuel
- employer-provided medical benefits (including dental)
From April 2028, most remaining benefits in kind follow. Employer-provided loans and living accommodation stay outside the mandatory track for now, with later confirmation. Draft regulations and an explanatory note sit on the GOV.UK package published July 2026. There is a temporary first-year easement for certain non-deliberate inaccuracies — useful, not a free pass.
KPMG’s note on the PSA call for evidence correctly frames the pair: PSA reform talk plus mandatory PBIK is one compliance programme, not two unrelated projects. Benefits that are clear, named and system-ready move into RTI. What remains for PSA should shrink toward genuine minor / irregular / impracticable residue. If your current PSA still carries medical premiums, car-related costs that will be mandatory, or other cleanly attributable perks, that inventory is already stale.
The Class 1B and gross-up cash reality
PSA economics are employer economics. You pay the tax and Class 1B NICs on the grossed-up amount because the employer is settling the employee’s liability. For 2026/27 planning, treat Class 1B at 15% on the combined benefit-plus-tax figure unless your adviser confirms otherwise for your facts. That is why “just put it on the PSA” is often the most expensive compliance choice, not the cheapest. It buys administrative simplicity and employee relations cover at a cash premium. CFOs should know the premium by category, not as a single opaque October bill.
Calendar locks that still bite this year:
- 5 July after the tax year — typical deadline to agree a new PSA or amend an existing one for that year (the 2025/26 window has already closed for most employers)
- 19 / 22 October — pay what you owe under the PSA (postal vs electronic)
- 15 September 2026 — respond to the call for evidence
- April 2027 / April 2028 — mandatory payrolling phases
What “good” looks like before 15 September
Do not wait for software vendors to finish their 2027 roadmaps before you clean the inventory. A workable CFO control pack looks like this:
- Full benefits inventory mapped three ways — mandatory PBIK Phase 1 (cars/fuel/vans/medical), likely Phase 2 (most other BIK), and residual PSA candidates that still meet minor/irregular/impracticable.
- Named owner and evidence file for every PSA category: why it qualifies, how value is estimated, how tax bands are allocated, and who signs the calculation.
- Gross-up policy written down — banded vs single rate, treatment of employees with no PAYE liability with this employer, Scottish/Welsh rate handling, and the worked examples you would hand an HMRC reviewer.
- System readiness for RTI — car data, medical premium feeds, fuel algorithms, joiners/leavers mid-year, and how FPS will carry the new fields without double-counting against tax codes.
- Policy rewrite so HR and reward stop promising “we’ll PSA it” for items that will be mandatory payrolled or are clearly attributable.
- Call-for-evidence response if you have real operational pain — multi-entity groups, event-heavy businesses, and software providers have the strongest evidence HMRC says it wants.
Where boards get this wrong
Three failure modes show up repeatedly:
- Category drift. A PSA agreed years ago for genuine shared hospitality slowly absorbs awards, recognition platforms, wellness stipends and other items that now have employee-level data. That is not “impracticable.” That is lazy routing.
- October surprise. Finance only sees the PSA liability when the calculation lands. By then the events have happened, the tax is grossed up, and the only decision left is how to pay. Build a live accrual by category from Q1.
- 2027 readiness as an IT ticket. Mandatory payrolling is a controls and data-ownership problem first. If reward, fleet, benefits brokers and payroll do not share a single inventory, RTI will amplify the mess monthly instead of annually.
Practical next steps this month
If you do nothing else before mid-September:
- Pull last year’s PSA computation and re-tag every line against the HMRC examples in the call for evidence.
- Mark every car, fuel, van and medical item for April 2027 RTI ownership — data source, owner, test plan.
- Ask payroll/software whether Phase 1 fields are in the sandbox now, not “on the roadmap.”
- Decide whether your group will submit a call-for-evidence response (even a partial one) by 15 September 2026 via payeconsultations@hmrc.gov.uk.
- Put the October 2026 PSA payment and the 2027 payrolling programme on the same audit-committee tracker. They are one employment-tax control story.
Bottom line
The PSA call for evidence is HMRC asking how the settlement valve actually works in the real economy. Mandatory payrolling is HMRC removing that valve for the big, clean benefits from 2027. CFOs who treat them as separate side projects will discover the residual PSA is both smaller and more heavily scrutinised, while RTI errors hit every pay cycle. Clean the inventory, write the gross-up rules down, respond if you have evidence, and put Phase 1 payrolling under a named owner before the consultation window shuts on 15 September.
This article is general information for finance leaders, not advice on your specific facts. Check the primary GOV.UK materials and take advice before changing PSA or payrolling arrangements.