SE11821 – Readily convertible assets: Example 1 - Asset listed on a recognised investment exchange

Section 203F(2)(a) ICTA1988

Example 1

The employer is the UK subsidiary of a multinational company based in the US, whose shares are listed on NASDAQ – the North American Securities and Derivatives exchange.

In June 1998 an employee of the UK subsidiary is given 1000 shares in the US parent company – the market value of each share is £10. There are no restrictions on sale of the shares.

Is the employer obliged to operate PAYE on the shares?

The employee has received shares worth £10,000 (1000 x £10) and was not required to make any contribution to the cost of the shares. Consequently under Section 19 ICTA1988 there is an income tax charge on £10,000, the money’s worth of the shares (see Share Schemes Manual 4.5).

Because the shares are listed on NASDAQ, a recognised investment exchange, the shares are readily convertible assets under Section 203F(2)(a) and the employer must operate PAYE on £10,000 at the date of award (see SE11804).

If the same award occurred before 6 April 1998 was PAYE due?

Yes. The definition of tradeable assets since 25 May 1994, operated in exactly the same manner as the definition of readily convertible assets, when a share, or other asset, was capable of sale on a recognised investment exchange, or the London Bullion Market.