Income Tax (Earnings and Pensions) Act 2003 section 509

Modification of section 696 where charge on shares ceasing to be subject to plan

Section 509 deals with how PAYE applies when shares leave a Schedule 2 Share Incentive Plan (SIP) and those shares are readily convertible assets, requiring the employer to operate PAYE on the estimated employment income arising.

• When shares cease to be subject to a SIP and trigger an employment income charge, and those shares are readily convertible assets, the employer must apply PAYE
• PAYE is calculated on the employer's best estimate of the amount likely to count as employment income — there is no requirement to use the precise final figure
• Any share market that exists solely because plan trustees acquired shares for the SIP is ignored when deciding whether the shares are readily convertible assets
• The participant is treated as receiving PAYE income at the time the shares leave the plan, linked to their relevant employment at that time or, if no longer employed, their most recent relevant employment