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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Options: abandonment of an option

TCGA92/S144 (4)

If an option is abandoned by the person currently entitled to exercise it, the abandonment does not constitute a disposal, and so does not give rise to an allowable loss. The treatment is different where the option which has been abandoned is

  • an option to acquire assets to be used for trade purposes, see CG12360, or
  • a quoted option to subscribe for shares in a company, a traded option or a financial option, see CG55400+.

‘Abandonment’ includes surrender for consideration, see Golding v Kaufman 58TC296 and Powlson v Welbeck Securities Ltd 60TC269. But although Section 144(4) may treat the abandonment of an option as not constituting a disposal, it does not prevent the receipt of the consideration, a capital sum derived from the option, being treated as a disposal of the option in accordance with TCGA92/S22 (1), see CG12940+. A chargeable gain or allowable loss may accrue on this deemed disposal as would have been the case had the option been disposed of by sale rather than surrendered for consideration. (See CG12360 for the wasting of allowable expenditure.)