SE12005 - PAYE on non-cash remuneration before 25 May 1994: example 2 - an entitlement to a monetary amount

Example 2

• An employer company has adopted Article 82 Table A of the Companies Regulations 1985, entitling a director to an annual bonus
• on 6 October 1993 the employer purchases 100 gold bars for £100,000 (plus commission)
• on 8 October at a specially company meeting attended by all shareholders, the employer resolves to award one director a bonus
• the minute of the resolution adopted at the meeting states "the company resolves to award a bonus of £100,000" but later the director agrees that the payment may be satisfied by the transfer of the gold bars
• on 9 October ownership of the 100 gold bars is transferred to the director
• on the same day the director sells the gold bars for £100,000.

Is the employer obliged to operate PAYE on the award?

For the employer to be obliged to operate PAYE, the award of gold bars must be a payment of assessable income by virtue of Section 203(1) ICTA 1988 (see SE12001).

The company has adopted Article 82 establishing the director's entitlement to a bonus (see SE42300). The resolution states that the director is entitled to a monetary amount of £100,000 and consequently there is a pre-existing entitlement to a monetary amount and this is a payment of assessable income subject to PAYE. See Paul Dunstall Organisation Ltd v Hedges ( SE12003).

The fact that the award was made by the transfer of gold bars, and not in cash, is irrelevant where the resolution has established an entitlement to money. The manner in which the entitlement is subsequently satisfied does not alter the underlying entitlement to money. For a comparison with a similar asset award before 25 May 1994, where there was no entitlement to money see example SE12004.