Where an employee is treated as receiving taxable employment income under the rules on employment-related securities, very often this will constitute a ‘dry’ tax-charge, meaning that the employee will suffer tax without there being any liquidity in the shares to pay the tax.

Where a ‘dry’ tax-charge arises and the securities in question are RCAs, the employer will need to account for PAYE to HMRC but may not be able to withhold the PAYE from amounts owed to the employee. In this situation, it will be up to the employer to chase the employee to ‘make good’ the liability.

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