SE11850 - PAYE avoidance: awards of shares

An employee who acquires shares from his employment either free, or in return for a payment which is less than the value of the shares, is chargeable to tax under Schedule E.

For details of the Schedule E tax charge on awards of shares, and options over shares, see The Share Schemes Manual (SSM), and especially:

• Chapter 2 – Approved Share Schemes (Sections 185 – 187 and Schedules 9 and 10 ICTA1988)
• Chapter 3 – Share options (Sections 135 – 140 ICTA1988)
• Chapter 4 – Share acquisitions, including Long Term Incentive Plans and Shares Subject to Risk of Forfeiture (Sections 19, 140A - H ICTA 1988).

If a Schedule E charge arises on an award of shares, or when shares are acquired on exercise of an option over shares, Section 203F ICTA1988 requires the employer to operate PAYE if the shares are readily convertible assets (see SE11852).