PAYE implications of employment-related securities

The following Tax practice note provides comprehensive and up to date legal information covering:

  • PAYE implications of employment-related securities
  • Occasions of charge and relevant dates
  • Additional rule for payments or assets
  • Amount of PAYE income—best estimate
  • Relief for employer's NICs met by employee
  • Best estimate—practical implications
  • PAYE and the remittance basis
  • Operating PAYE—cash payments
  • Operating PAYE—notional payments
  • Who must operate PAYE—employer or other payer?
  • More...

PAYE implications of employment-related securities

Pay as you earn (PAYE) is the mechanism by which income tax (and National Insurance contributions (NICs) and certain other statutory deductions) must be withheld and accounted for to HMRC by employers (and other payers) in relation to certain payments of:

  1. employment income

  2. pension income, and

  3. social security income (together, PAYE income)

For more information, see Practice Note: Scope of the PAYE system.

PAYE income includes cash payments made to employees or directors (eg salaries, bonuses and termination payments). Non-cash payments are generally excluded from the operation of PAYE but a key exception to this is payments in the form of (or deemed to be in the form of) readily convertible assets.

In the context of employment-related securities, whether or not PAYE obligations arise is dependent largely, but not entirely, on the employment-related securities in question being readily convertible assets. For full details on the meaning of readily convertible assets, see Practice Note: PAYE—readily convertible assets, intermediaries and jurisdictional scope.

An important rule in this context is that all securities are currently deemed to be readily convertible assets (whether or not they would otherwise be so) unless they are shares that are corporation tax deductible.

Even if the employment-related securities are not (and are not deemed to be) readily convertible assets, PAYE obligations can still arise in the case of certain of

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