Income Tax (Earnings and Pensions) Act 2003 section 700

PAYE: gains from securities options

Section 700 sets out how PAYE applies when an employee receives employment income arising from gains on employment-related securities options, whether through acquiring securities, assigning or releasing an option for consideration, or receiving a benefit.

• When an employee acquires securities under a securities option and this counts as employment income, the PAYE rules treat the employer as having provided the employee with PAYE income in the form of those securities on the date the chargeable event occurs.
• Where the employee assigns or releases a securities option for consideration, PAYE applies to any cash element as if it were a payment of PAYE income, and to any asset element as if the asset were provided as PAYE income by the employer on the relevant date.
• Where consideration is partly in cash and partly in the form of an asset, the amount subject to PAYE on the asset element is proportionate to the value of the asset relative to the total consideration, ensuring the total PAYE amount does not exceed the employment income charge.
• The amount treated as employment income for PAYE purposes is calculated after deducting any relief the employee is likely to receive for secondary Class 1 National Insurance contributions or special contributions that the employee has borne.