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HMRC internal manual

Capital Gains Manual

Options: taxation

TCGA92/S21 (1)(a), TCGA92/S144

Specific legislation provides that certain disposals which would have been dealt with under the capital gains rules are instead to give rise to income profits or losses. This applies

  • for Corporation Tax purposes only, where the options fall within the legislation in Part 7 CTA09 (Derivative Contracts). (Or previously, within the legislation in FA02 (Derivative Contracts), or FA94 (Financial Instruments)). See CFM50000+, or
  • in cases where schemes or arrangements involving the use of options or/and futures are designed to give a guaranteed return, see Chapter 12 Part 4 ITTOIA05 and CG56200. (Or previously, ICTA88/Sch5AA, which applied also for Corporation Tax until such options and futures were brought within the FA02 rules for derivative contracts.)

For capital gains purposes an option is a chargeable asset, see TCGA92/S21 (1)(a). Special rules for the capital gains treatment of options are to be found in TCGA92/S144 to TCGA92/S148.

  • The guidance at CG12311 onwards addresses the capital gains treatment of options in general.
  • Guidance on quoted options to subscribe for shares in a company, traded options and financial options is at CG55400 onwards.