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HMRC internal manual

Capital Gains Manual

Financial options: tax treatment of grantor

The grantor’s transactions are likely to be taken into account in computing income profits or losses. However, if not, the ordinary rules of TCGA92/S144 apply, see CG12300+. The grant of the option is treated as the disposal of an asset, the option itself. If the option is exercised Section 144(2) applies to treat the grant and exercise of the option as a single transaction. The premium received is added to the disposal proceeds of any asset sold or deducted from the acquisition cost of any asset purchased. Any tax paid in respect of grant of the option should be discharged or set-off.