Posted by Nick Day on 17 Feb 2012

PAYE on Share-Based Payments

Payments made by an employer after an employee had ceased working for them used to be taxed at the basic rate of tax.  This was altered so that currently, graduated rates of PAYE tax are applied depending on the level of payment made.

However, share-based payments were excluded from this rule owing to the practical difficulties involved, especially where, perhaps, the broker or the employer were not UK-based. This exclusion is set to be reversed and HM Revenue and Customs are proposing to tax share-based payments at graduated tax rates using PAYE code “0T”, from 6 April 2012.

This is sure to cause payroll procedural problems for employers and may lead to cash-flow issues for employees with international/cross border work histories. Different countries apply differing rules to share-based payments, with some taxing by reference to grant, some on vesting and some on exercise/sale. The tax and social security (National Insurance) positions in different countries may also vary!

Contact Tax Innovations for advice on PAYE on Share-Based Payments

This is a hugely complex area but our qualified experts are available to help you if necessary. Contact us for advice or to talk about our services.


See also…

HMRC Admit PAYE Code Problems

PAYE Attention: RTI is Coming!

Revised Guidance for Modified PAYE/International Assignees

PAYE Notices of Coding

Changes to the Taxation of Share Awards for Expats

Employee Share Schemes

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