Part 11

Pay As You Earn
Chapter 4

PAYE: special types of income

Income provided in other ways

Enhancing the value of an asset
697
1
This section applies if—
a
any PAYE income of an employee is provided in the form of anything enhancing the value of an asset in which the employee or a member of the employee’s family or household already has an interest, and
b
that asset, with its value enhanced, would be treated as a readily convertible asset if PAYE income were provided to the employee in the form of the asset at the time of the enhancement.
2
Section 696 has effect as if—
a
the employee had been provided, at the time of the enhancement, with PAYE income in the form of the asset (with its value enhanced), instead of with what enhanced its value, and
b
the reference in subsection (2) to the provision of the asset were a reference to the enhancement of its value.
3
Any reference in this section to enhancing the value of an asset is a reference to—
a
the provision of any services by which the asset or any right or interest in it is improved or otherwise made more valuable,
b
the provision of any property the addition of which to the asset improves it or otherwise increases its value, or
c
the provision of any other enhancement by the application of money or property to the improvement of the asset or to securing an increase in its value or the value of any right or interest in it.
4
There is excluded from the scope of what constitutes enhancing the value of an asset for the purposes of this section any enhancement of value arising on the acquisition by the employee (whether or not as a result of the exercise of a right to acquire shares) of—
a
any shares acquired by the employee under a scheme approved under ... Schedule 9 to ICTA (approved profit sharing schemes),
aa
any shares acquired by the employee under a scheme which is a Schedule 3
SAYE
option scheme (see Schedule 3),
ab
any shares acquired by the employee under a scheme which is a Schedule 4
CSOP
scheme (see Schedule 4),
b
any right over or interest in shares obtained or acquired by the employee under a scheme mentioned in any of the preceding paragraphs, or
c
any shares acquired by the employee as a result of the exercise of a right over shares obtained before 27th November 1996,
if the shares in question form part of the share capital of a company falling within section 701(3).
5
PAYE regulations may make provision excluding such other matters as may be described in the regulations from the scope of what constitutes enhancing the value of an asset for the purposes of this section.
S. 697(4)(aa) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 137(b), 146 (with Sch. 8 paras. 147-157)
S. 697(4)(ab) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 201, 204 (with Sch. 8 paras. 205-215)
Words in s. 697(4)(a) omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 137(a), 146 (with Sch. 8 paras. 147-157)
Words in s. 697(4)(b) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 137(c), 146 (with Sch. 8 paras. 147-157)
Pt. 11 power to amend or repeal conferred (21.7.2009) by Finance Act 2009 (c. 10), Sch. 58 para. 10