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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 schemes: Requirements relating to share options: Exercise rights: Involuntary cessation of employment - injury, disability, redundancy and retirement – a TUPE transfer or a change of control of the employing company

Schemes must provide the right of early exercise when option-holders cease employment due to:

  • injury,
  • disability,
  • redundancy (within the meaning of the Employment Rights Act (1996) (see ),
  • retirement (see ),
  • a sale of business  that is a TUPE transfer, (see ), or
  • a change of control of the employing company (see ).

The scheme must give a right of exercise in the six months following cessation of employment for these reasons. Although the legislation merely requires the option to cease to be capable of exercise after this, it is usual for schemes to provide that the option lapses at the end of the six month period.

It is permissible for the ‘good leaver’ option exercise period to be less than six months.

Options exercised within six months of employment ceasing for these reasons are not subject to an income tax charge, regardless of how long they have been held (Section 519 ITEPA).