ITEPA03/S696 requires that where PAYE income is provided in the
form of a readily convertible asset, the amount on which the
employer must operate PAYE is the employer’s best estimate
that can reasonably be made of what is likely to be PAYE income.
ITEPA03/S698 stipulates how PAYE should be applied to
charges in respect of employment-related securities. In general,
where an amount is treated as employment income by virtue of one of
the charging provisions of Part 7 of ITEPA 2003, then the reference
in ITEPA03/S696 to the amount likely to be PAYE income is a
reference to what is likely to count as employment income by virtue
of the Part 7 charge. ITEPA03/S700 applies PAYE to gains from
securities options in a broadly similar way to the way section 698
does for charges on employment-related securities
ITEPA03/S700A provides that, where section 698 or 700
applies and part or all of the amount that counts as employment
income is (or is likely to be) foreign securities income then the
amount of the payment that is treated as being made for PAYE
purposes under section 696 is the full amount of the employment
income arising under Part 7, less the amount that is likely to be
foreign securities income by virtue of ITEPA03/S41C to 41E.
This means that, if the employer has sufficient information
to calculate the amount of employment income which is foreign
securities income (that is; the amount that is taxable on the
remittance basis), then it is the net amount of employment income
after deduction of the foreign securities income on which PAYE
should be operated. Where the employer does not have sufficient
information to calculate, using the best estimate that can
reasonably be made, the amount of foreign securities income, then
PAYE should be operated on the full amount of the employment
income, subject to any apportionment the employer has sufficient
information to make in respect of treaty exemption. (See
ERSM161300)
An example where an employer could make a reasonable
estimate of an employee’s foreign securities income would be
where the employer knows that the employee is resident and not
ordinarily resident for the year and has evidence, such as an
assurance from the employee, that a claim to the remittance basis
will be made. If the employee’s overseas duties are fairly
regular from year to year, and/or the expected balance of his or
her UK and overseas duties for the current year is known, then the
employer could reasonably estimate the FSI on the basis of its
expectation for the current year.
