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HMRC internal manual

Employment Related Securities Manual

From
HM Revenue & Customs
Updated
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PAYE & NICs

All the specific charges in Chapters 2 to 4 Part 7 ITEPA 2003, as amended by FA03/SCH22, 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), then PAYE should still be operated if:

  • the amount counts as income by virtue of PAYE is operated on the part that is regarded as RCA.

Relevant date

The “relevant date” means for charges under:

  • section 427(3)(c) – disposal of restricted securities for consideration,
  • section 439(3)(b) – disposal of convertible securities for consideration,
  • section 439(3)(c) – release of entitlement to convert for consideration,
  • section 439(3)(d) – receipt of benefit in connection with convertible securities,
  • section 446Y – disposal of securities for consideration of more than market value, or
  • section 447 – 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.