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Introduction

Where a share incentive plan is operated, the company may have obligations to account for income tax and NIC via the PAYE system if there are gains made in connection to employee shares. This will be the case where the shares meet the definition of a readily convertible asset (RCA). It is therefore crucial to understand the definition of an RCA to avoid errors and underpayments which can attract penalties.

See Simon’s Taxes E4.1124

Definition: what is a readily convertible asset?

The statutory definition of an RCA is given in ITEPA 2003, s 702. There are 9 types of asset within that definition. An asset:

1. •

   capable of being sold or otherwise realised on a recognised investment exchange

2. •

   capable of being sold or otherwise realised on the London Bullion Market

3. •

   capable of being sold or otherwise realised on the New York Stock Exchange

4. •

   capable of being sold or otherwise realised on a market for the time being specified in PAYE regulations

5. •

   consisting in