Income Tax (Earnings and Pensions) Act 2003 section 699

PAYE: conversion of shares

Section 699 deals with how PAYE applies when an employee converts convertible shares, ensuring the employer accounts for tax on the employment income that arises at the point of conversion.

• When an employee converts convertible shares acquired through their employment, the conversion gives rise to employment income which is subject to PAYE.
• The employer (or former employer) is responsible for deducting and accounting for income tax through the PAYE system on this employment income.
• The approach mirrors the PAYE treatment for other share-related events, following the same broad framework as that used for chargeable events on restricted securities.
• This provision originates from the former section 203FB of the Income and Corporation Taxes Act 1988, as updated by the Finance Act 2003.