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HMRC internal manual

Capital Gains Manual

Shares and securities: options and futures

CG55400+ deals with quoted options to subscribe for shares, traded options and financial options. The options in question have statutory definitions. The options may relate to shares or to certain other financial assets. The options may be in a standard form so they can be traded on an Exchange. Or they may be created by financial institutions to meet the requirements of particular customers; over-the-counter options. The normal rules which apply to options, see CG12300+, are modified. The acquisition cost is not reduced by the wasting asset rule, see CG12330, and the abandonment of the option, see CG12340, is treated as a disposal.

CG56000+ deals with futures. A future is a contract for the future delivery of commodities, shares, securities, foreign currency or other financial instruments. Futures are a variety of forward contract. At its simplest that is an agreement to buy or sell a fixed amount of a commodity or financial instrument at a specified future date and at a pre-agreed price. Futures give the holder not just the right but the obligation to buy or sell at the specified price. Again, there is a distinction between exchange-traded futures and over-the-counter futures. There are computational rules to deal with futures contracts that have closed out before their expiry and contracts that are settled by making a payment rather than delivering an asset.

In some circumstances, profits or losses on disposals of options and futures which would otherwise have fallen to be dealt with under capital gains rules are specifically taken instead into the income regime. These are identified in the guidance.