SE11900 – PAYE avoidance: the amount on which to operate PAYE

Section 203F(3) ICTA 1988

The amount on which to operate PAYE - general

From 6 April 1998, the amount on which the employer should operate PAYE where assessable income is provided to an employee in the form of a readily convertible asset, is the amount of income likely to be chargeable to tax under Schedule E (see SE11901).

Where an employer is unable to calculate the exact amount, PAYE must be operated on the best estimate the employer can reasonably make (see SE11902).

This measure of the amount chargeable under PAYE applies where an employee:

• is provided with a readily convertible asset; or
• owns a readily convertible asset whose value is enhanced by the employer; or
• acquires a readily convertible asset through exercise of a share option; or
• has shares which are readily convertible assets, following lifting of a risk of forfeiture or conversion.

Before 6 April 1998 there were different rules for determining the amount on which PAYE should be operated on awards of tradeable assets (see SE12020).