EIM11907 – PAYE: meaning of readily convertible assets: an asset likely to provide cash without action by the owner

Section 702(1)(b)(iii) ITEPA 2003

Before 6 April 1998, a popular PAYE avoidance arrangement involved an employer providing an employee with an asset likely to give rise to a right enabling the employee to obtain money without the employee necessarily taking any action. Section 702(1)(b)(iii) ITEPA 2003 makes it clear that such an asset is a readily convertible asset and the employer must operate PAYE.

The most common scheme of this type concerned a reversionary interest in an offshore trust (RIOT). The trusts used in these schemes typically had a life expectancy, stated in the trust deed, lasting only a week or so. When the trust ceased the owner of the interest in the trust inevitably received a payment of the capital held in that trust, see example EIM11925.