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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Options: cash-settled options

TCGA92/S144A

The treatment of the parties on the exercise of an option is modified where, under the terms of the option, or its exercise, the grantor is required to make a payment to the person exercising it in full or partial settlement of his obligations under the option. In these circumstances TCGA92/S144A applies. See CG12321 and CG12322.

Traded and financial options over the RPI or other financial index can only be cash-settled as there is no underlying asset which can be transferred when the option is exercised. Thus, if a taxpayer acquires a call option over the FTSE 100 index with a strike price of 5,500 and exercises it when the index stands at 5,600, he receives not shares in companies within the FTSE 100 but a payment based upon the difference between the strike price and the index. At £10 per point he would receive £1000.