PAYE—readily convertible assets, intermediaries and jurisdictional scope
PAYE—readily convertible assets, intermediaries and jurisdictional scope

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

  • PAYE—readily convertible assets, intermediaries and jurisdictional scope
  • Readily convertible assets
  • Securities which are not shares that are corporation tax deductible
  • Payments by intermediaries
  • Jurisdictional scope

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 further detail, 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. A key exception to this is payments in the form of (or deemed to be in the form of) readily convertible assets, which are subject to PAYE.

This Practice Note explains the definition of readily convertible assets, which is extremely wide. It includes assets (such as shares) which are tradeable on a recognised investment exchange (or certain specified commodities or stock exchanges). It also includes assets for which trading arrangements exist, such as:

  1. alternative markets or exchanges, or

  2. where an employer has arranged for an employee to be able to sell an asset awarded to him (eg pursuant to a put or call option)

The definition of readily convertible assets is relevant in the context of employment-related securities and securities options and often dictates whether or not PAYE obligations arise (for further detail,