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HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

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HM Revenue & Customs
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Schedule 4 Company Share Option Plan (CSOP): Shares to be used: When requirements must be satisfied

In Schedule 4 CSOP schemes the scheme shares must meet the relevant requirements:

  • at the date of grant of all options, and
  • at the date of exercise of all options.

In practice this normally means that the shares have to satisfy the relevant requirements throughout the life of an option scheme.

It is important that the shares satisfy the relevant requirements at the date of grant of an option because the option price is fixed by reference to the market value of the shares at that time. The share value used should therefore relate to a share which is free from possible manipulation and which satisfies paragraphs 16-20.

  • It is important that the shares satisfy the relevant requirements at the date of exercise because the provisions of a tax advantaged scheme must give option-holders rights to acquire shares that satisfy paragraphs 16-20, and therefore require such shares to be issued or transferred on option exercise.

Section 524(1) ITEPA only provides relief from income tax if the shares are acquired in accordance with the provisions of a Schedule 4 CSOP scheme.