ETASSUM32170 - Schedule 3 SAYE Option Scheme: Eligibility of individuals to participate: The employment requirement: Death of an option holder
Although Schedule 3 SAYE options must not be transferable, a mandatory exception is that the scheme rules may permit the option to be exercised if the option-holder has died. Exercise by either the personal representatives or by the beneficiaries of the estate is acceptable.
Scheme rules must permit exercise to take place at any time within 12 months of the date of death (paragraph 32 (a)), in a case where death occurs before the bonus date, or 12 months after the bonus date, in a case where the participant dies on or within 6 months of that date (paragraph 32 (b)).
This is irrespective of whether any other relevant exercise window will end earlier but see ETASSUM35460 and ETASSUM35540 for the possible exception (i) where the option exercise trigger is a company winding-up or (ii) where the option holder is a US taxpayer.
When the shares are subsequently sold by the personal representatives or beneficiaries, there will be a charge to capital gains tax based on the sale proceeds less the market value of the option at the date of death, less the (option) price paid by the personal representatives to acquire the shares on option exercise.
Example
01/06/2005
Option granted over 10000 shares with exercise price of £1 per share
1/2/2007
Option-holder dies, at this time the value of a share is £1.50
Value of the option is £5,000 taking into account difference between exercise price and value of shares using the following calculation:
£1.50 minus £1 multiplied by 10,000 equals £5,000
1/10/2007
Option exercised by personal representatives
Shares sold by personal representatives for £18000 (£1.80 each)
2007/08 Capital Gain is calculated as follows:
Disposal proceeds - £18,000
Less expenditure:
Value of option at death minus £5,000 plus cost of shares £10,000 equals £15,000