SE12010 - PAYE avoidance: the "tradeable asset" rules

Section 203F-L ICTA 1988

Introduction to the “tradeable asset” rules

Non-cash remuneration schemes became popular in the late 1980s and early 1990s and employers were only obliged to operate PAYE in cases where the transfer of an asset satisfied a pre-existing entitlement to money (see SE12002).

PAYE avoidance legislation in Sections 203F-L ICTA1988 was introduced by Finance Act 1994 and came into effect on 25 May 1994. A Section 144A charge arose on an employee when the employer was required to operate PAYE under Section 203F, and the employee did not make good the PAYE to the employer within 30 days of the award.

Outline of the legislation

The main features of Sections 203F-L are as follows:

• an employer must operate PAYE when providing an employee with a “tradeable asset”
• a tradeable asset has three alternative definitions (see SE12011)
• one of the definitions of “tradeable asset” required “trading arrangements” to be in place at the time the asset is provided (see SE12012)
• the amount on which an employer must operate PAYE depends on which definition of “tradeable asset” applies (see SE12020) and will be

• either the amount capable of being realised if the asset was sold on an exchange or market
• or the amount actually obtained for sale of the asset under trading arrangements.

• Sections 203J and L provided the machinery for the collection of PAYE on these “notional” payments in the form of tradeable assets
• associated with Sections 203F– L, a Section 144A charge arose on an employee who did not make good the PAYE to the employer within 30 days of the award of tradeable assets (see SE11950).