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HMRC internal manual

Employment Related Securities Manual

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HM Revenue & Customs
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PAYE & NICs

Readily convertible assets

The meaning of “readily convertible asset” is provided by ITEPA03/S702.

There are nine possibilities to consider when determining whether an asset is a readily convertible asset. Only one needs to be satisfied. The possibilities are:

  1. an asset capable of being sold or otherwise realised on a recognised investment exchange (RIE) (see EIM11901);
  2. an asset capable of being sold or otherwise realised on the London Bullion Market (see EIM11902);
  3. an asset capable of being sold or otherwise realised on the New York Stock Exchange (see EIM11903);
  4. an asset capable of being sold or otherwise realised on a market for the time being specified in PAYE regulations (see EIM11904);
  5. an asset consisting in the rights of an assignee, or any other rights, in respect of a money debt that is or may become due to the employer or any other person (see EIM11905);
  6. an asset consisting in property that is subject to a warehousing regime, or any right in respect of property so subject (see EIM11906);
  7. an asset consisting in anything that is likely (without anything being done by the employee) to give rise to, or to become, a right enabling a person to obtain an amount or total amount of money that is likely to be similar to the expense incurred in the provision of the asset (see EIM11907);
  8. an asset for which trading arrangements are in existence, or are likely to come into existence in accordance with any arrangements of another description existing when the asset is provided (see EIM11908); and
  9. an asset for which trading arrangements are in existence, or are likely to come into existence in accordance with any understanding existing when the asset is provided (see EIM11908);

but there is one further test provided in ITEPA03/S702 (5A) with effect from 10 July 2003:

  1. an asset consisting in securities, which is not a readily convertible asset under (a) to (i) above, is to be treated as a readily convertible asset unless the securities are shares that are corporation tax deductible.

 

Meaning of “securities”

“Securities” has the same meaning as in ITEPA03/S420 – see ERSM20110.

Shares that are corporation tax deductible

Shares are corporation tax deductible if they are acquired by a person:

  • by reason of that, or another person’s, employment with a company, or
  • pursuant to an option granted by reason of that, or another person’s, employment with a company, and
  • the company is entitled to corporation tax relief in respect of the shares under FA04/SCH23 – see BIM44265.

See examples at ERSM170040.