Income Tax (Earnings and Pensions) Act 2003 section 698

PAYE: special charges on employment-related securities

Section 698 sets out how PAYE applies when an employee receives amounts that count as employment income arising from various taxable events connected with employment-related securities, such as restricted securities, convertible securities, securities acquired at undervalue, or post-acquisition benefits.

• When a taxable event occurs in relation to employment-related securities and an amount counts as employment income, PAYE applies as though the employer had provided the securities as PAYE income on the relevant date, with the taxable amount reduced by any relief available for secondary Class 1 National Insurance contributions borne by the employee.
• Where the securities are not readily convertible assets but the income charge arises because the employee receives a payment or an asset (for example, on disposal, conversion, or receipt of a benefit), PAYE still applies — treating any cash element as a payment of PAYE income and any asset element as a provision of PAYE income by the employer on the relevant date.
• The "relevant date" for PAYE purposes varies depending on the type of taxable event: it may be the date of the chargeable event, the acquisition date, the valuation date, the date a notional loan is discharged, the disposal date, or the date a benefit is received.
• "Employment-related securities" carries the same meaning as in Chapters 1 to 4 of Part 7 of the Act, and the entire section is subject to separate rules for internationally mobile employees under section 700A.