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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): Supplementary and defined terms: Tax case - Eurocopy

Eurocopy plc sought to alter the exercise provisions of its approved executive scheme and apply the altered terms to options already granted. The point at issue was whether the Revenue was right to refuse to approve an alteration to the scheme which would have the effect of altering the times when existing (as well as new) options could be exercised. The terms on which the existing options had been granted set the time for exercise as between 9 and 10 years after grant. The alteration would have permitted exercise between 6 and 10 years after grant.

Mervyn Davies J. held that the Revenue was right to refuse to approve the alteration under paragraph 4 Schedule 9. He considered that when the alteration was made the existing option holders obtained rights at that time which were not the same rights as they held before the alteration.

In deciding that, as a result of the alteration, the option holders would obtain new or different rights, the Judge considered that:

  • the tax advantaged share option scheme legislation (Section 185 and Schedule 9) contemplates a right to acquire a specified number of shares, at a specified price, within a specified time span. If the time span is altered, so the right is altered;
  • it is not necessary to decide whether the new rights would be conferred by:            


  • a new option contract (as the Revenue had contended unsuccessfully before the Special Commissioners) because the original had been rescinded by altering a fundamental term (asset; price; time) which went to the root of the contract,  or
  • the original option contract, as varied.

It was sufficient that new or different rights had been obtained at the date of the alteration.