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HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

HM Revenue & Customs
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Schedule 4 Company Share Option Plan (CSOP): Requirements relating to options: Market value (MV) of shares

The option acquisition price must not be manifestly less than the market value of shares of the same class at:

  • the time when the option is granted, or
  • at such earlier time or times as may be agreed in writing by an officer of HM Revenue & Customs.

Scheme rules may, of course, provide scope for options to be granted at a price in excess of the permitted minimum.

It is important that companies should be certain that the value by reference to which they are granting options is accepted by HM Revenue & Customs as being not less than the market value. If an option is granted with an acquisition price less than the market value, it will not have been granted in accordance with the terms of the Schedule 4 CSOP scheme. The agreement of SAV should be sought unless the market value has been ascertained in accordance with the guidance here and at ETASSUM47160.

Market value is defined in paragraph 36(1) as having the same meaning as in Part VIII Taxation of Chargeable Gains Act (TCGA) 1992.

For shares listed in Daily Official List of the London Stock Exchange, there are specific provisions in Section 272(3) TCGA 1992 for determining market values based on their listed prices. Otherwise the general definition in Section 272(1) applies. This defines the market value as the price those shares might reasonably be expected to fetch on a sale in the open market.