PAYE on readily convertible assets

Produced by Tolley in association with

Employment Tax

Guidance

Introduction

Where a share incentive plan is operated, the company may have obligations to account for income tax and NIC via the PAYE system if there are gains made in connection to employee shares. This will be the case where the shares meet the definition of a readily convertible asset (RCA). It is therefore crucial to understand the definition of an RCA to avoid errors and underpayments which can attract penalties.

See Simon’s Taxes E4.1124.

Definition: what is a readily convertible asset?

The statutory definition of an RCA is given in ITEPA 2003, s 702. There are 9 types of asset within that definition. An asset:

•
capable of being sold or otherwise realised on a recognised investment exchange
•
capable of being sold or otherwise realised on the London Bullion Market
•
capable of being sold or otherwise realised on the New York Stock Exchange
•
capable of being sold or otherwise realised on a market for the time being specified in PAYE regulations
•
consisting in

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Helen Wood

Founder, HLN WD TX , Employment Tax

Helen Wood is the founder of HLN WD TX, a share schemes and employee incentives advisory business.She qualified as a CA with ICAS in 2009 and has worked as a specialist reward and incentives advisor for 17 years, spending 13 of those at KPMG followed by 3 ½ years as an Associate Director at RSM. Helen has worked with businesses ranging from start-ups to fully listed companies, spanning owner-managed businesses, private equity portfolio companies, and AIM listed businesses.She advises on a wide range of employee share schemes and employment related securities matters including the design and implementation of effective management and employee incentives; tax valuation of employment related securities, buy and sell side transaction support, HMRC compliance, tax due diligence and employee ownership trust transactions.

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