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HMRC internal manual

Employment Related Securities Manual

Valuation Issues

Valuations for PAYE purposes

Where securities are acquired by reason of an employment and there is a charge to Income Tax, there will be an obligation on an employer to operate PAYE (and NIC) if the securities are readily convertible assets.

In operating PAYE, employers must use the best available estimate of the amount chargeable to Income Tax/NIC. Where such an estimate is required by an HMRC form (e.g. Form 35, Form 42), if the valuation provided on the form is the best available at the time of the transaction, then if a different value is subsequently agreed, we will not regard the form as incorrect.

Where a different amount chargeable to income tax is subsequently agreed the revised amount should be used in the company’s corporation tax computation and by employees in their Self Assessment Tax Returns.