SE11807 - PAYE avoidance: readily convertible assets

Section 203F(2)(d) ICTA 1988

Readily convertible asset – property held “in bond”

Before 6 April 1998 several PAYE avoidance schemes involved an employer providing an employee with an asset that was held

• in storage; or
• in a special warehouse subject to a fiscal warehousing regime; or
• under a similar arrangement in any state within the European Economic Area.

A common scenario involved an asset held in a special warehouse regulated by Customs and Excise, or a similar authority. While in this warehouse the owner does not have to pay customs duties or VAT - the assets are sometimes referred to as held “in bond”. Awards of oriental carpets are a common example of schemes used in this way. See example SE11824.

Since 1994 employers providing these assets should operate PAYE. The asset was a tradeable asset (see SE12011) because there were trading arrangements to allow for sale of the asset, but some employers contest this.

From 6 April 1998, the reference in Section 203F(2)(d) to assets held in this way as readily convertible assets puts it beyond doubt that the employer should operate PAYE at the time the assets are awarded to an employee.