Employment Tax

Employment-related securities ― PAYE

Produced by Tolley in association with Ken Moody
  • 19 Oct 2021 23:17

The following Employment Tax guidance note Produced by Tolley in association with Ken Moody provides comprehensive and up to date tax information covering:

  • Employment-related securities ― PAYE
  • Share awards
  • Charges under the ERS rules
  • Tax
  • NIC
  • Real Time Information (RTI)
  • Valuation
  • Making good by employee
  • Payment of employer’s NIC by employee
  • Reporting requirements
  • More...

Employment-related securities ― PAYE

Share awards

An outright award of employment-related securities (ERS) represents ‘money’s worth’ and is within the meaning of ‘earnings’ for ITEPA 2003, s 62 and is taxable as such. The amount taxable is reduced by any payment made by the employee. The ‘money’s worth’ value is seldom different from the statutory open market value for capital gains tax purposes.

The charge to tax as earnings does not apply to shares that are acquired as a result of the exercise or vesting of an ERS option. Instead, the acquisition of such shares is a chargeable event under ITEPA 2003, s 476 (see ‘Charges under ERS rules’ below). Likewise, shares acquired by an employee under one of the tax-advantaged schemes (SAYE, share incentive plan (SIP), company share option plan (CSOP) and enterprise management incentive (EMI)) are subject to the tax rules covering the scheme in question, rather than being taxed as earnings.

Charges under the ERS rules

Under the ERS rules in ITEPA 2003, ss 422–484 (Chapters 2–5, Pt 7), a charge to tax can arise if any of the various ‘chargeable events’ occur (see the Employment-related securities ― overview guidance note). In such a case, an ‘amount which counts as employment income’ is taxable as ‘specific employment income’.

Tax

The employer potentially has to operate PAYE in respect of ‘PAYE employment income’. That is made up of ‘taxable general earnings’ (ie earnings and benefits in kind) and ‘specific employment income’ (including charges under the ERS rules). However, whether the employer has to deduct tax on a particular item of income depends upon whether that income takes the form of a payment or benefit, or is treated as such, and whether the securities are readily convertible assets (RCAs) ― see the Readily convertible assets guidance note.

Where PAYE income is provided in the form of an RCA, the employer is treated for PAYE purposes as making a payment of the estimated value of the asset. Therefore, if shares that

Access this article and thousands of others like it
free for 7 days with a trial of TolleyGuidance.

Think Tax.
Think Tolley.

Critical, comprehensive and up-to-date tax information

TAKE A FREE TRIAL

Popular Articles

Subsistence expenses

IntroductionSubsistence is the amount incurred as a consequence of business travel. Typically it relates to accommodation and meal costs incurred. These amounts are allowed because they are associated with the necessary travel. See the Travel expenses guidance note for more information of when

05 Jan 2022 14:31 | Produced by Tolley in association with Philip Rutherford Read more Read more

Loans written off

Companies sometimes provide directors, employees or shareholders with low interest (or interest-free) loans either as part of the reward package or on special occasions to help the individual meet significant expenditure. The employment income implications of these loans are discussed in detail in

25 Oct 2021 14:12 | Produced by Tolley Read more Read more

Solicitors ― VAT treatment of services

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marked the end of the Brexit transition / implementation period entered into following the UK’s withdrawal from the EU. At this point in time, key transitional arrangements came to an end and significant changes began to take effect across the UK’s

25 Oct 2021 13:44 | Produced by Tolley Read more Read more