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Income Tax (Earnings and Pensions) Act 2003

Section 700: PAYE: gains from share options

2840.This is the third of the three sections derived from section 203FB of ICTA. It deals with employment income under sections 476 (Charge on exercise, assignment or release of option by employee) and 477 (Charge on employee where option exercised, assigned or released by another person).

2841.The section takes broadly the same approach as sections 698 and 699 but includes minor changes.

2842.Subsection (3) deals with the assignment or release of the right to acquire shares. Where this happens the consideration might be a cash payment or an asset. Sections 684 to 691 and 696 could be relevant – depending on whether the consideration is a payment made direct, payment by an intermediary, the provision of an asset or whatever.

2843.Subsection (3)(a) deals with consideration in the form of a payment. It treats as a payment of PAYE income a proportion of the amount chargeable under sections 476 or 477 less any relief likely to be due under section 481. Having regard to the relief which is likely to be due is a minor change to remove an inconsistency in section 203FB. See Change 151 in Annex 1.

2844.Subsections (3) and (4) together include a further minor change in the law. This is to ensure the total amount subject to PAYE does not exceed the employment income. See Change 151 in Annex 1.

2845.Subsections (6) and (7) give “asset” in this section a meaning which includes cash vouchers and certain non-cash vouchers and credit-tokens. See Change 152 in Annex 1.

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