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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Financial options: definition

TCGA92/S144 (8), TCGA92/S144 (9), TCGA92/S143 (8)

Financial option is the term used in TCGA92/S144 to describe a range of options issued by banks and other financial concerns. Unlike quoted option and traded option the term financial option does not have any particular commercial meaning outside the tax legislation. The purpose of the legislation is to make sure options which come within the definition of financial option get the same treatment as traded options.

Section 144(8)(c) defines a financial option as an option which is not a traded option, as defined in Section 144(8)(b), see CG55512, but which

  • relates to currency, shares, securities or an interest rate and is granted (otherwise than as an agent) by a member of a recognised stock exchange or an authorised person

or

  • relates to shares or securities which are dealt in on a recognised stock exchange and is granted by a member of such an exchange acting as agent

or

  • relates to currency, shares, securities or an interest rate which is granted to an authorised person and at the same time the authorised person grants an option back to the grantor of this option. For further details see CG55570

or

  • relates to shares or securities which are dealt in on a recognised stock exchange and is granted to a member of such an exchange including such a member acting as agent.

TCGA92/S144 (9) authorises the Treasury to make orders treating specified options as financial options. To date no such orders have been made.

For the definition of a recognised stock exchange see CG50250.

The definition of an authorised person is contained in TCGA92/S143(8) and is a person who -

  1. falls within section 31(1)(a),(b),or (c) of the Financial Services and Markets Act 2000, and
  2. has permission under that Act to carry on one or more of the activities specified in Article 14 and, in so far as it applies to that Article, Article 64 of the FSMA 2000 (Regulated Activities) Order 2001.

In correspondence you should use or refer to the full definition and not refer simply to authorised persons. You may accept that any reputable financial concern is an authorised person. Any case of doubt or difficulty should be referred to Capital Gains Technical Group.