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HMRC internal manual

Employment Income Manual

PAYE: meaning of readily convertible assets: examples: asset listed on a recognised investment exchange

Section 702(1)(a)(i) ITEPA 2003The employer is the UK subsidiary of a multinational company based in the USA, whose shares are listed on NASDAQ (the North American Securities and Derivatives Exchange).

On 30 June 2003 an employee of the UK subsidiary is given 1,000 shares in the US parent company. The quoted value of those shares on 30 June 2003 is £10 per share. There are no restrictions on sale of the shares.
### Is the employer required to operate PAYE on the shares?The employee has received shares worth £10,000 (1,000 x £10) and was not required to make any contribution to the cost of the shares. The money’s worth of the shares (see Share Schemes Manual, SSM4.5), £10,000 is chargeable to tax as employment income under Part 2 ITEPA 2003 and is therefore PAYE income for Part 11 ITEPA 2003.

As the shares are listed on NASDAQ, a recognised investment exchange, the shares are readily convertible assets under Section 702(1)(a)(i) ITEPA 2003. The employer must operate PAYE on £10,000 at the date of award (see EIM11901).