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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: Change of control

Schedule 4 makes no provisions concerning when an option may be exercised so it is for the company to determine the circumstances that will allow for exercise. A change of control may occur in a number of ways so it is important that the scheme rules are clear as to the circumstances when exercise will be permitted. The right to exercise may be subject to discretion with the usual provisos and also contingent on whether or not an exchange of options will be offered by the acquiring company. An option exercised within 3 years of the date of grant for a ‘change of control’ will not attract tax relief unless the requirements of section 524(2E) are satisfied (see ETASSUM48110).

ETASSUM44410 explains the circumstances when the shares obtained (upon exercise) after a change of control no longer satisfy the legislative requirements.