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HMRC internal manual

Employment Income Manual

PAYE: meaning of readily convertible assets: examples: asset not tradeable on the London Bullion Market

Section 702(1)(c) ITEPA 2003On 10 August 2003 an employer pays a metal supplier £252,500 for 5 bottles of platinum sponge based on a market price of £250,000, plus 1% supplier’s commission. Unlike pure platinum metal, platinum sponge is not tradeable on any recognised investment exchange, or on the London Bullion Market. The platinum sponge is retained by the supplier but not held in bond (see example EIM11824).

On 12 August the employer awards a director a bonus in the form of platinum sponge and informs the director of the available options:
* the metal supplier will retain the platinum sponge as an investment * the supplier will arrange delivery of the platinum sponge * the supplier will repurchase the platinum sponge for cash and the employer helpfully provides full details of the supplier, including a prepared form showing the sale details for the director to complete and return to the supplier.On 13 August the director sells the platinum sponge to the supplier, receiving the market price of £249,700.

Is the employer obliged to operate PAYE on the platinum sponge?Yes. The platinum sponge is a readily convertible asset under Section 702(1)(c), because on 12 August there was an understanding that trading arrangements were likely to come into existence in future for sale of the sponge. This is because the employee knew that the supplier was willing to repurchase the sponge for money (see