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HMRC internal manual

Employment Related Securities Manual

HM Revenue & Customs
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PAYE on or after 16 April 2003 on conditional shares acquired before

The charges on conditional shares acquired before 16 April 2003 are grandfathered in that Chapter 2 Part 7 as originally enacted in ITEPA 2003 continues to apply to them– see ERSM30200.

Correspondingly, PAYE is imposed by ITEPA03/S698 as originally enacted on such charges onor after 16 April 2003. The charges affected are:

  • ITEPA03/S427 (1) (as originally enacted) shares ceasing to be conditional or disposed of, and
  • ITEPA03/S431 (as originally enacted) death of employee holding conditional shares.


PAYE is only exigible if the shares are readily convertible assets (see ERSM170020).

The employee is treated as if provided with a notional payment equal to the charge.

ITEPA03/S222 applies in relation to any employee not making good PAYE tax to the employer– see ERSM170400.