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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Employment-related securities: securities options: employee

The Capital Gains Tax consequences for the employee will depend on whether a securities option, see CG56321, is

exercised

If the option is exercised, the grant of the option and the issue or transfer of shares on exercise of the option are treated as forming a single transaction. See CG12313. The cost of the securities acquired by the employee on exercise of the option depends on the date of exercise.

If the employee exercises the option after 9 April 2003 the cost of the securities is the total of

  • the amount actually paid by the employee for the option (or its market value at the date of grant if granted before 28 November 1995)
  • the amount paid by the employee for the securities on exercise of the option
  • any amount counting as income on exercise of the option under S476 ITEPA03. See TCGA92/S119A; CG56328.

If the employee exercised the option before 10 April 2003 the cost of the shares acquired by the employee on exercise is the market value of the shares at the date of exercise.

See CG53621+.

If remittance basis applies to an amount counting as income, see CG25395.

assigned or released

The assignment or release of an option is a disposal of the option for Capital Gains Tax purposes. The release of an option includes its surrender, or cancellation. However, where Chapter 5 Part 7 ITEPA03 applies, any consideration for the assignment or release counts as employment income. TCGA92/S37 (1) then has the effect that there is no disposal consideration to be brought into the CGT computation.

not exercised and lapses

If the option is not exercised, and simply lapses, there is no allowance to the employee for any amounts paid for the grant of the option, see CG12340.