ERSM170020 - PAYE & NICs
Operation of PAYE on employment income from employment-related securities
These steps will help you to decide if PAYE is due or not on employment income from employment-related securities and shares.
Step 1 – Is there an amount that is PAYE employment income?
PAYE employment income is defined at ITEPA03/S683(2). It includes both taxable earnings (see EIM00511) and any taxable specific income (see EIM00512).
The following steps apply for employment-related securities where the employment income is taxable earnings. An amount will be taxable specific income if there is a charge to tax under any of the provisions within Part 7 ITEPA (see ERSM170100).
Step 2 - Is the security a readily convertible asset (RCA) in accordance with ITEPA03/S702(1) – (5)? For example, the securities are quoted or subject to current or future trading arrangement. If YES, then PAYE is due. If NO, then go to step 3.
Step 3 - Is the security a ‘Corporation Tax (CT) deductible share’ in accordance with ITEPA03/S702(5A) – (5D) and Corporation Tax Act 2009, Part 12? If NO, then PAYE is due. If YES, then PAYE is not required.
ESSU cannot advise you on the process of putting the correct amounts of employment income from employment-related securities through your payroll.