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The taxpayers were employees of EGS. They were granted and exercised company share options making substantial unrealised gains.
It was eventually agreed that a notional gain arose that was subject to income tax. The taxpayers included the amount in their self assessment tax return and paid the tax due.
The employer was also required if possible to operate PAYE on the notional payment to the employees but could not do so because there was no payment from which tax could be deducted.
In that case TA 1988 s 203J (now ITEPA 2003 s 710) stated that the employer should account for the tax from other payments - e.g. salary - made at the same time as the notional payment.
Furthermore the tax must be paid even if...
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