PAYE20145 - employer records: set up employer record: PSS scheme – profit sharing

If an employer gives shares to an employee, the employee is normally liable to income tax under PAYE and a PSS scheme type should be created. Profit Sharing Schemes that have been approved by the Board of HMRC are dealt with by Savings and Investment Division (Employee Share Scheme Unit), who will notify you of when approval has been given to such a scheme

Deduction of tax under PAYE for Profit Sharing Schemes

For detailed information on shares appropriated to employees under approved Profit Sharing Schemes see the Share Schemes Manual (SSM).

For further detailed information about Share Incentive Plans (SIP) approved by Employee Share Schemes Unit see the Business Income Manual (BIM).

In general, the trustees of the profit sharing scheme will pay the employer the taxable amount. The employer must deduct tax if the participant is

• An employee of the company

Or

• A coded pensioner receiving an occupational pension from the employer

The trustees of the profit sharing scheme will pay the employer the amount on which Income tax is payable, and the employer will

• Enter the payment on the employee’s Deductions Working Sheet (the employer does not have to distinguish the payment from other entries on the sheet)
• Deduct tax in the same way as for a payment of wages

You will be asked to use this scheme type when the trustees

• Make a payment to a participant who is no longer an employee or coded pensioner of the company

Or

• The trustees must deduct tax under PAYE using code BR. For example a participant may have asked for their shares to be transferred from the Trust into their own name before the release date

If the Profit Sharing Scheme extends to employees of subsidiary companies in a group the PAYE scheme for the Trustees should be set up in the same Processing Office as the main employer in the group.