SE11805 - PAYE avoidance: readily convertible assets

Section 203F(2)(b) ICTA 1988

Readily convertible asset – market specified in PAYE regulations

Although this definition is unchanged from the one which applied since 1994 to tradeable assets, before August 1998 no market had been specified under this subsection and so the definition had not applied in practice.

If an employer provides an employee with an asset that can be sold, or otherwise realised, on a market specified in PAYE regulations, the asset is a readily convertible asset and the employer is obliged to operate PAYE.

The only market specified in regulations for this purpose is the New York Stock Exchange (NYSE) – this regulation came into effect on 4 August 1998. The NYSE is not a recognised investment exchange.

Consequently an award of shares in a company listed on the NYSE, on or after 4 August 1998, represents assessable income in the form of readily convertible asset.

Was PAYE due on a similar award before 4 August 1998?

Before 4 August 1998 shares listed on the NYSE could not be readily convertible assets under this definition. But the NYSE, like any other market or exchange, provides for shares to be sold on any trading day and this facility satisfies the alternative definition of readily convertible assets based on the existence of trading arrangements (see SE11811).

Accordingly shares listed on the NYSE would have been readily convertible assets (or tradeable assets before 6 April 1998) – see example SE11822.