ERSM170100 - PAYE & NICs:Special charges on employment related securities

All the specific charges in Chapters 2 to 4 Part 7 ITEPA 2003 are potentially treated as notional payments on the relevant date and subject to PAYE. They are:

  • section 426 (chargeable events in relation to restricted securities and restricted interests in securities) with effect from 1 September 2003 – see ERSM30390,
  • section 438 (chargeable events in relation to convertible securities and interests in convertible securities) with effect from 1 September 2003 – see ERSM40060,
  • section 446B (charge on acquisition where market value of securities or interest artificially depressed) – see ERSM50100,
  • section 446L with effect from 1 September 2003 (charge where market value of securities artificially enhanced) – see ERSM60100,
  • section 446U with effect from 1 September 2003 (securities or interest acquired for less than market value: charge on discharge of notional loan) – see ERSM70140,
  • section 446UA (securities or interest acquired for less than market value: charge in avoidance cases) with effect from 2 December 2004 – see ERSM70200,
  • section 446Y (charge where securities or interest disposed of for more than market value) with effect from 1 September 2003 – see ERSM80030, and
  • section 447 (chargeable benefit from securities or interest) with effect from 1 September 2003 – see ERSM90020.

 

Where readily convertible assets

Where the employment-related securities, in respect of which the charge arose, are readily convertible assets (RCA) (see ERSM170020), then PAYE should be operated.

 

Where not readily convertible assets

If the employment-related securities, in respect of which the charge arose, are not RCA (see ERSM170020), but the amount counts as income by virtue of:

  • section 427(3)(c),
  • section 439(3)(b), (c), or (d),
  • section 446Y, or
  • section 447 - and the whole or any part of the consideration or benefit takes the form of a money payment then PAYE should be applied to that payment.
  • Where the consideration or benefit consists in the provision of an asset then PAYE should be applied if that asset is a RCA.

Relevant date

The “relevant date” means for charges under:

  • section 427(3)(c) – the date of disposal of restricted securities for consideration,
  • section 439(3)(b) – the date of disposal of convertible securities for consideration,
  • section 439(3)(c) – the date of release of entitlement to convert for consideration,
  • section 439(3)(d) – the date of receipt of benefit in connection with convertible securities,
  • section 446Y – the date of disposal of securities for consideration of more than market value, or
  • section 447 – the date of receipt of benefit in connection with securities, and
  • the whole or any part of the consideration or benefit concerned takes the form of a payment or consists in the provision of an asset, which is itself a RCA.
  • section 426 or 438, the date on which the chargeable event in question occurs,
  • section 446B, the date of the acquisition of the securities or interest in securities in question,
  • section 446L, the valuation date in question,
  • section 446U, the date on which the notional loan in question is treated as discharged,
  • section 446UA, the date of the acquisition of the securities or interest in securities in question,
  • section 446Y, the date of the disposal of the securities or interest in securities in question, and
  • section 447, the date on which the benefit in question is received.