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HMRC internal manual

Capital Gains Manual

Employment-related securities: securities options: employer: replacement option


A replacement option may be granted over the shares in the same or a different company. This may happen for a number of reasons, one of which is that the company that granted the option is taken over by another company. If so, the old option may be released in consideration of the grant of a replacement option.

Where the old option is released, TCGA92/S237A provides that the release of the old employment-related share option is not to be regarded as consideration received for the grant of the new option. Thus where the sole consideration for the grant of the new option is the release of the first option, the grantor has no liability in respect of chargeable gains.

If the grantor receives additional consideration for the grant of the replacement option a gain will accrue on this disposal.