Income Tax (Earnings and Pensions) Act 2003 section 512

Disposal of beneficial interest by participant

Section 512 deals with what happens when a participant in a share incentive plan disposes of their beneficial interest in plan shares back to the trustees, and how the tax rules on payments and PAYE apply in that situation.

• The section applies when a participant sells or transfers their beneficial interest in plan shares to the plan trustees
• As a result of the disposal, the trustees are treated under capital gains tax rules as having disposed of the shares themselves
• The consideration the trustees would pay to the participant is treated as if it were proceeds the trustees received from selling the plan shares
• This triggers the normal rules requiring the trustees to account to the employer company and operate PAYE on the amounts involved