SE12000 – PAYE avoidance: non-cash remuneration before 6 April 1998

Sections 203F – L ICTA1988

PAYE avoidance before 6 April 1998 – general

The readily convertible asset legislation in Sections 203F-L ICTA 1988 took effect from 6 April 1998 (see SE11803). These rules aim to combat various schemes where employers sought to avoid PAYE and National Insurance Contributions (NIC) by providing employees with non-cash remuneration.

Before 1998/99 the development of non-cash remuneration schemes, and the legislation to combat them, fell into two broad categories:

• before 25 May 1994 (see SE12000)
• between 25 May 1994 (when Finance Act 1994 introduced the “tradeable asset” rules in Sections 203F-L ) and 5 April 1998 (see SE12010).

In some circumstances, the arguments that applied to PAYE avoidance in non-cash remuneration schemes before 25 May 1994 continue to apply, even though specific legislation at Sections 203F-L to combat these schemes was introduced in 1994 and amended in 1998.

For instance, where an employer transfers a property to an employee in circumstances where there are no trading arrangements (see SE11812) for the property, Section 203F may not apply but it may be possible to adopt a Paul Dunstall (see SE12003) argument instead to oblige the employer to operate PAYE on the transfer.

Consequently it is important to understand

• the position in non-cash remuneration cases before Sections 203F-L were introduced on 25 May 1994; and
• to appreciate how Sections 203F-L operated between 25 May 1994 and 6 April 1998.