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HMRC internal manual

Employment Income Manual

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HM Revenue & Customs
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PAYE: employment-related securities: background

Part 7 ITEPA 2003 as amended by Schedule 22 FA 2003

Part 7 ITEPA 2003 was fundamentally amended by Schedule 22 FA 2003. The guidance in the Share Schemes Manual will be amended in due course to provide details of the income chargeable to tax by virtue of Part 7 ITEPA 2003. The following guidance only covers the requirement placed upon the employer to operate PAYE on the occurrence of an event by virtue of which an employee is deemed to have received a payment of income chargeable to tax.

The amendments to the legislation at Part 7 ITEPA 2003 take effect from different dates depending on the chapter within Part 7 by which the deemed payment is chargeable to tax(see EIM12201).

Part 11 Chapter 4 ITEPA 2003 as amended by Schedule 22 FA 2003

For PAYE, the legislation at Part 11 Chapter 4 ITEPA 2003 has been amended by Schedule 22 FA 2003 as follows:

  • Section 698 (PAYE: shares ceasing to be only conditional or being disposed of) and Section 699 (PAYE: conversion of shares) have been replaced by a new Section 698 (PAYE: special charges on employment-related securities) with effect from 1 September 2003 (see EIM12220 to EIM12280)
  • Section 700 (PAYE: gains from share options) has been replaced by a new Section 700 (PAYE: gains from securities options) with effect from 1 September 2003 (see EIM12300)
  • Section 701 (Meaning of “asset”) has been amended with effect from 9 April 2003 to require the employer to operate PAYE in the event of the exercise of a right to acquire shares under an approved company share option plan (CSOP) scheme in certain circumstances (see EIM12210)
  • Section 702 (Meaning of “readily convertible asset”) has been amended with effect from 10 July 2003 to include all securities unless the security is a share that is not otherwise a readily convertible asset and shares of that class are corporation tax deductible (see EIM12400).