Income Tax (Earnings and Pensions) Act 2003 section 697

Enhancing the value of an asset

Section 697 deals with the PAYE treatment of PAYE income provided to an employee in a form that enhances the value of an asset the employee (or a family or household member) already holds, where the enhanced asset would be a readily convertible asset.

• Where PAYE income enhances the value of an asset already held by the employee or their family/household, and the enhanced asset would qualify as a readily convertible asset, the PAYE rules for readily convertible assets apply as though the employee had been given the whole enhanced asset rather than just the enhancement.
• Enhancement of value includes providing services that improve the asset, adding property that increases its value, or applying money or property to secure any other increase in the asset's value or in the value of any right or interest in it.
• Certain share acquisitions are excluded from counting as value enhancements — specifically shares or rights acquired under approved profit sharing schemes (Schedule 9 to ICTA), Schedule 3 SAYE option schemes, Schedule 4 CSOP schemes, or through the exercise of share rights obtained before 27 November 1996, provided the shares form part of the share capital of a qualifying company under section 701(3).
• PAYE regulations may prescribe further exclusions from the definition of what constitutes enhancing the value of an asset for the purposes of this section.