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Section 702(1)(b)(ii) ITEPA 2003

A UK company decides to award a bonus to its managing director in recognition of services provided during the year ended 30 April 2003. On 28 June 2003, the company arranges to purchase 8 oriental carpets from a supplier costing 拢101,500 (拢100,000 plus 1.5% commission to the supplier).

On 1 July the employer awards the carpets to the director. The carpets are held in storage and the director has 3 options:
- the carpets may be retained in storage (for a small fee) - the supplier may arrange delivery to the director - the supplier may be willing to repurchase the carpets from the director.

On 2 July the director decides to sell the carpets back to the supplier and on 4 July the director receives 拢100,000.
### Is the employer obliged to operate PAYE on the oriental carpets?

The employee has received an asset worth 拢100,000 and was not required to make any contribution to the cost. The money鈥檚 worth of the carpets is chargeable to tax as employment income under Part 2 ITEPA 2003 and is therefore PAYE income for Part 11 ITEPA 2003.

Under Section 702(2)(b)(ii) ITEPA 2003 any property that is subject to a warehousing regime is a readily convertible asset (see EIM11906). Consequently the employer is required to operate PAYE on 拢100,000 at the time of the award on 1 July 2003.