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HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

Company Share Option Plan (CSOP): Taxation: Exercise of share options - general

Section 476(1) provides for a charge to income tax where a “chargeable event” occurs in respect of an employment-related securities option. With regard to Schedule 4 CSOP options, this will be where options are exercised in circumstances that do not qualify for tax advantages or the options do not meet the requirements of Schedule 4 (refer to ETASSUM48150) Chargeable event is defined in section 477 as:

  • Acquisition of securities pursuant to the employment-related securities by an associated person,
  • Assignment for consideration of the employment-related securities option by an associated person other than to another associated person or the release for consideration by an associated person,
  • The receipt by an associated person of a benefit in connection with the option. 


The exceptions to this are if the event arises on or after the death of the employee or if at the time of the acquisition of the securities option the earnings from the employment of the employee were not general earnings to which sections 15 or 21 applied (earnings for year when employee both resident and ordinarily resident in the UK).


Sections 478 & 479 determine the amount of charge resulting from the acquisition of the security or other chargeable event as:

  • The amount of any gain realised on the occurrence of a chargeable event (AG) less any deductible amounts (DA) – AG - DA


  • For the acquisition (including exercise) of the security, AG is the Market Value (MV) of the securities at the time they are acquired (date of exercise) less any consideration given for the securities that are acquired (C) – MV - C
  • For the assignment or release, AG is the amount of consideration received
  • For the benefit, AG is the amount or Market Value of the benefit


  • Deductible amounts (DA) are defined in section 480 as:


  • Any consideration given for the acquisition of the securities option, and
  • The amount of any expenses incurred in the acquisition of the securities, assignment, release or receipt which constitutes the chargeable event.

It should be noted that expenses incurred in disposing of the securities do not constitute deductible amounts.

These are subject to the anti-avoidance provisions in sections 479(7) & (8) where a charge to income tax may arise under Chapter 3A – see ERSM50000 & ERSM110500.