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HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

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HM Revenue & Customs
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Schedule 3 Save As You Earn (SAYE) option scheme: Grant of share options - Legal considerations

It is clear from the requirements of paragraph 2(1) Schedule 3 that the purpose of a Schedule 3 SAYE Option scheme is the narrow one of granting ‘share options’ to directors and employees with the shares acquired by the exercise of share options to be paid for with the repayment from the linked savings contract. Section 516(4) ITEPA defines a ‘share option’ as ‘a right to acquire shares in a company’. The word ‘right’ indicates that there must be some sort of legal entitlement.

For an employee or director to have a legally enforceable ‘right’ to acquire shares under English law:

  • the option must have been granted under company seal or deed, or
  • consideration must have been given for the grant of the option.

In the case of a savings-related scheme the consideration for the grant of an option is normally taken to be the undertaking of the employee to enter into and comply with the obligations under the savings contract.