PAYE operation: payments for PAYE purposes: non-cash remuneration
Readily convertible assets
Section 696 ITEPA 2003 requires employers to operate PAYE where they remunerate employees in the form of a readily convertible asset. The amount that is treated as PAYE income for the purpose of operating PAYE is the best estimate that can reasonably be made of the amount of income likely to be PAYE income in respect of the provision of the asset.
Section 702 ITEPA 2003 defines the meaning of ‘readily convertible asset’ and the Employment Income Manual at EIM11900 onwards, gives information on the different types of readily convertible asset.
Note: The amount (value or best estimate that can reasonably be made) is chargeable to tax at the UK (England, Wales and Northern Ireland) or Scottish income tax rate(s) depending on the individual’s residency status.
The Income Tax Residency Status screen on NPS will display ‘Scottish Taxpayer’ for the tax year where the individual is liable to pay tax at the Scottish rate(s) and their tax code will have an S prefix. Further information about the Scottish rate of Income Tax is given at PAYE100035
The treatment of ordinary benefits in kind (for example cars, private health insurance, employee’s private expenses met by the employer), remain outside the scope of PAYE and must be reported to HMRC by the employer on form P9D / P11D.
Note: 2015-16 is the last tax year the P9D can be used.
National Insurance Contributions
Advice regarding National Insurance Contributions on non-cash remuneration should be sought from HMRC NICO. Enquiries from employers / agents should be referred to the NIC Employer Helpline: 0300 200 3200.