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HMRC internal manual

Capital Gains Manual

Options: example: put option

In consideration of a payment of £100 by X to Y, Y grants to X the option to sell a chargeable asset to him within two years for £15,000

  • If Y did not incur any allowable expenditure in granting the option he has a chargeable gain of £100 from the disposal of the option. This is assessable for the year in which the option was granted.
  • If X exercises the option, his receipt on the disposal of the asset to Y is £15,000 less deemed incidental costs of disposal £100 and the consideration given by Y for his acquisition of the asset is £15,000 - £100 = £14,900. If Y has already been assessed on the £100 gain from the disposal of the option itself any tax charged in respect of that disposal should be discharged, and, if the tax has been paid, it should be set-off or repaid, see SAM12351+.
  • If X abandons the option there is no loss relief to him and Y remains liable on a chargeable gain of £100.