Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Convertible definition

What does Convertible mean? In practice, a convertible (often a convertible bond or convertible loan note/CLN) is a debt instrument that pays interest and gives the holder a contractual right to convert the principal (and sometimes accrued interest) into shares of the issuing company on stated terms. It is a descriptive market expression rather than a term defined in the Companies Acts, though UK and EU/Irish securities rules refer to “convertible securities” for prospectus, listing and market abuse purposes. Key features typically include: a fixed or accruing coupon; a maturity date; a conversion price or formula (e.g. discount to a future...

Readily convertible assets and employee share options: UK PAYE/NICs obligations, trading arrangements, PISCES, ITEPA 2003 section 222 and corporation tax deduction carve-out

Published by a LexisNexis Share Incentives expert

Practice notes

Readily convertible assets and PAYE

If an employee is given a right to acquire shares (an option) under a plan that is not tax favoured, a potential income tax liability can arise on exercise, assignment or release under sections 471–484 of the Income Tax (earnings and Pensions) Act 2003 (ITEPA 2003). Where the shares are not readily convertible assets (RCAs), any income tax due is handled through the UK self-assessment system.

pay as you earn (PAYE) is the method by which employers (and other payers) must withhold income tax and account for it to HMRC on certain payments of:

employment income
pension income
social security income

Generally, non-cash payments fall outside PAYE. An important exception is where payments are in, or treated as being in, the form of RCAs, which brings them within PAYE. Put simply, RCAs are treated in the same way as salary paid in cash under the UK tax system. For more detailed information on PAYE, see Practice Note: PAYE implications of securities options.

When does PAYE not apply?

The requirement to operate PAYE does...

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Web page updated on 21/05/2026

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