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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: Rights issues

Adjustments to reflect rights issues are more difficult and where a company has contacted ESSU with proposals for clarification in this respect, ESSU technical advisors should normally refer the company’s proposals to HMRC Shares and Assets Valuation (SAV) for advice on whether the adjustments are acceptable.

The basic principle is that the “necessary” adjustment is one which would adjust the acquisition price (which is based on the market value of the shares at the date of grant) and the number of shares, to what it would have been had the new share structure been in place when the options were first granted.

SAV accept that the following formula Word 30KB is acceptable for computing the adjustment to be applied to the original option acquisition price to take account of a rights issue. But it is not necessarily the only method of adjustment acceptable to SAV.