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HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

HM Revenue & Customs
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Schedule 3 SAYE Option Scheme: Eligibility of individuals to participate: The employment requirement: Grant of options

The timing of the grant of options in relation to the entering into the related savings contract is not specified in the legislation. But the terms of the SAYE Prospectus make   it clear that savings contracts can only be entered into by an individual “for the purpose of participating in a SAYE option scheme that meets the requirements of Schedule 3 of ITEPA 2003”. Participate is defined in Schedule 3 as “obtain and exercise share options under the scheme”. It follows therefore that the options will be granted at or before the time the related savings contract is entered into.

An undertaking to enter into a savings contract may be accepted as sufficient consideration, for contract law purposes, for the grant of a savings-related option. Although it is not a requirement, it is acceptable for scheme rules to provide that options can be granted by deed executed by the grantor of the option.

It is not acceptable for new options to be linked to existing savings contracts which originally related to other options which may have lapsed or been surrendered. It is implicit in paragraphs 24, 25 and 30 that the grant of an option should be linked to a new savings contract.

The first payment under the savings contract should be made as soon as possible after the grant of the option. Understandably, companies and savings bodies have a variety of administrative arrangements to complete between grant and first payment, but HMRC would not normally expect intervals of more than 6 months between grant and first payment.

Excessive intervals between the grant of the option (by reference to which the option price is fixed) and the date the first savings contribution is made may undermine the intention of the statutory provisions, particularly those governing the option exercise price.