EIM12300 - PAYE: employment-related securities: gains from securities options: background
Part 7 Chapter 5 ITEPA 2003
Part 7 Chapter 5 ITEPA 2003 was fundamentally amended by Schedule 22 FA 2003:
- with effect from 16 April 2003 in relation to employment-related securities options which are not share options (see EIM12320) and
- with effect from 1 September 2003 in relation to employment-related securities options which are share options (see EIM12310).
It provides for a charge to income tax on the occurrence of a chargeable event in relation to an employment-related securities option. Broadly, the events that represent a chargeable event in relation to an employment-related securities option are:
- the acquisition of securities by the exercise of an employment-related securities option
- the assignment or the release for consideration of an employment-related securities option
- the receipt of a benefit in money or money’s worth in connection with an employment- related securities option.
See Securities options: contents - HMRC
PAYE
Section 700 ITEPA 2003 was fundamentally amended by Schedule 22 FA 2003 with effect from 1 September 2003. Under Section 700, the person who was the employer at the time an employment-related securities option was issued is required to operate PAYE in respect of an amount that counts as employment income by reason of Part 7 Chapter 5 ITEPA 2003.
If the event that represents a chargeable event in relation to an employment-related securities option is:
- the acquisition of securities by the exercise of the option, or
- the acquisition of an asset other than money:
- as consideration for the assignment or release of the option, or
- in connection with the option
then the employer is only required to operate PAYE on the amount that counts as employment income if the securities or other asset acquired is a readily convertible asset(see EIM12400).
If the event that represents a chargeable event in relation to an employment-related securities option is the receipt of money:
- as consideration for the assignment or release of the option, or
- in connection with the option
then the employer is treated as having made the payment and is required to operate PAYE on the amount that counts as employment income.