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HMRC internal manual

Capital Gains Manual

From
HM Revenue & Customs
Updated
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Private residence relief: gains: options

Options and the treatment of options for capital gains tax purposes are set out at CG12300+.

If a person grants an option to purchase all or part of their residence, the treatment of the consideration received for the grant of the option depends on whether the option is exercised.

Where the option is not exercised, the grant of the option is treated as a disposal of an asset, the asset being the option, under TCGA92/S144 (1). Private residence relief should be given to the same extent as relief would have been given on a disposal of the residence, or the part of it subject to the option, as if it had taken place on the same date as the option was granted.

Where the option is exercised, the grant of the option and its exercise are treated as a single transaction under Section 144 (2). So the consideration received for the grant of the option is added to the consideration received for the exercise of the option. In this situation the residence, or part of it, is disposed of and relief will be available if all the other conditions for relief are met.