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HMRC internal manual

National Insurance Manual

From
HM Revenue & Customs
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Class 1 NICs: Securities: Readily convertible assets

Regulation 1(2) of the Social Security (Contributions) Regulations 2001

A payment by way of an asset which is a readily convertible asset is earnings liable for Class 1 NICs. Readily convertible assets have the meaning given in section 702 of the Income Tax (Earnings and Pensions) Act 2003. There are nine possibilities to consider when determining whether an asset is a readily convertible asset and only one needs to be satisfied. These are:

(a) an asset capable of being sold or otherwise realised on a recognised investment exchange;

(b) an asset capable of being sold or otherwise on the London Bullion Market:

(c) an asset capable of being sold or otherwise realised on the New York Stock Exchange;

(d) an asset capable of being sold or otherwise realised on a market for the time being specified in PAYE regulations;

(e) 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 employee or any other person;

(f) an asset consisting in property that is subject to a warehousing regime, of any right in respect of property so subject;

(g) 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 similar to the expense incurred in the provision of that asset;

(h) an asset for which trading arrangements are in existence, or likely to come into existence in accordance with any arrangements or another description existing when the asset is provided;

(i) an asset for which trading arrangements are in existence, or likely to come into existence, in accordance with any understanding when the asset is provided.

In addition to the above, since 1 September 2003 an asset consisting in securities which is not a readily convertible asset under (a) to (i) is treated as a readily convertible asset unless the securities are shares which are corporation tax deductible.

EIM11900 provides further guidance on readily convertible assets.