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HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

Schedule 3 SAYE option schemes: Requirements relating to share options – The exercise price: Adjustments permitted

Paragraph 28(3) permits schemes to provide that the acquisition price, the number of shares which may be acquired and the description of shares may be adjusted “so far as necessary” to take account of a variation in the share capital of the company concerned. Where they do so the variation must secure that:

  • the total market value of the shares subject to the option is substantially the same immediately after the variation as it was immediately before the variation, and
  • the total acquisition price immediately after the variation is substantially the same as it was immediately before the variation.

In practice, adjusting only the acquisition price per share will usually be inadequate. It will normally be necessary, if an equitable result is to be achieved, for the number and perhaps the description of shares subject to an option to be varied also.

However, there is no authority to adjust the class of shares under option.

Where there is a variation in the share capital of the company, the agreement of HMRC’s Shares and Assets Valuation must be secured unless it is a straightforward bonus issue valuation that ESSU has agreed or a rights issue based on certain formula (refer to ETASSUM35260).

Alterations to subsisting options may be key feature alterations, and so these must be reported in the annual return for the tax year in which the alteration is made. The company must also certify in the return that the alteration does not result in the scheme no longer meeting the requirements of Parts 2-7 of Schedule 3.