PAYE Settlement Agreements

Employers have a choice for minor and irregular non-cash benefits not yet processed through payroll: they can either include them in December payroll as taxable benefits or apply for a PAYE Settlement Agreement by 31 December 2026. If opting for a PSA, the employer bears the tax cost, meaning employees receive these benefits free of tax.

Overview

A PAYE Settlement Agreement enables employers to settle the tax, USC, and PRSI on minor and irregular non-cash benefits provided to employees during the year through a single annual payment. The employer bears the tax cost, meaning employees receive these benefits free of tax.

Key dates

• 31 December 2026: PSA application deadline (via Revenue My Enquiries)
• 23 January 2027: Payment deadline for all taxes due

If employers choose not to use a PSA or miss the deadline, benefits should be processed through December payroll as normal taxable items.

What qualifies for PSA treatment?

Benefits must meet all three criteria: they must be minor in value, irregular in frequency, and non-cash in nature.

Typical PSA items

Common items include staff entertainment exceeding Revenue's exemption criteria, gift vouchers not covered by Small Benefit Exemption, late-working taxi fares, long-service awards and performance prizes, and gym memberships provided on an irregular basis.

Cannot be included

Cash payments, regular monthly benefits, items qualifying for Small Benefit Exemption, and contractual entitlements are all excluded from PSA treatment.

Recent Revenue guidance

July 2025: Favourable calculation changes

Revenue has updated the PSA calculation methodology in 2025. USC and PRSI are no longer included in the gross-up calculation, resulting in lower PSA costs for employers.

Benefits for higher-rate taxpayers are now grossed up at 40% (income tax only) rather than including USC and PRSI in the gross-up as previously required. The specified combined PRSI rate of 15.15% and USC are then applied to the grossed-up amount. This results in substantial savings for employers compared to the previous calculation method.

November 2025: Refund opportunities

Revenue has confirmed that employers who submitted PSAs for 2021-2024 may be entitled to refunds due to the changes to the PSA calculation methodology. Revenue will contact affected taxpayers directly. Approved refunds will include interest in accordance with Revenue guidance.

Current Revenue focus areas

Staff entertainment under scrutiny

Employee entertainment has emerged as a key area of Revenue focus in recent years. While company-wide occasions remain acceptable when genuinely inclusive and reasonable, Revenue is increasingly challenging team outings, departmental events, and farewell celebrations as potential taxable benefits.

In light of this increased focus, maintaining strict controls around staff entertainment, including robust documentation, is essential. Employers may wish to review items historically treated as non-taxable to determine whether PSA inclusion should be considered.

Other key areas

Late-working taxi fares remain under close examination, with Revenue ensuring the strict conditions are met: work must finish after 10pm or before 6am, be irregular (maximum 60 journeys annually), and not form part of normal working patterns.

Small Benefit Exemption compliance is another area of focus, with Revenue verifying the proper application of the scheme, which allows up to 5 benefits with a combined maximum value of €1,500, all reported through ERR in real-time. Once an employee has received their full SBE entitlement, any additional vouchers or benefits become taxable and may be included in your PSA or processed through payroll.

Immediate actions required

December payroll decision point

With December payrolls currently being processed, employers should consider if any benefits provided during the year fall within the minor and irregular category. For these items, employers should decide whether to process them through payroll as taxable benefits or include them in a PSA application.

Before 31 December

Review all 2026 non-cash benefits provided to employees. Identify any items not processed through payroll that qualify as minor and irregular. Submit your PSA application via Revenue My Enquiries and retain confirmation.

By 23 January 2027

Calculate the final tax liability, submit detailed PSA return, and ensure payment is made to Revenue.

Important considerations

With December payroll deadlines approaching, employers should identify any non-cash benefits provided during 2026 that haven't been processed through payroll. Employers should consider whether these items meet the minor and irregular criteria for PSA inclusion or whether they should be taxed through December payroll.

Clear documentation supporting the classification of benefits as minor and irregular is essential for compliance, particularly given Revenue's increased scrutiny in this area.

Professional support available

Given the imminent deadline and complexity of the PSA rules, professional guidance can help ensure all qualifying benefits are identified, calculations reflect current Revenue guidance, any refund opportunities are properly pursued, and full compliance is maintained.

Contact us for assistance with your 2026 PSA submission or to discuss the implications of current Revenue guidance.