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HMRC internal manual

Employment Income Manual

Employment income: transfer of real property to employees: options

Land (or an interest in land) may be transferred to an employee in accordance with the terms of an option granted previously by the employer to the employee. Where the option is granted for consideration or is given under seal (in Scotland, whether or not granted for a consideration or under seal) any employment income liability can normally only arise as at the date the option is granted, not when it is exercised (see Abbott v Philbin (39TC82)).

An Inspector should consult the Valuation Office Agency on the value of such an option when it is granted.

If options only receive critical scrutiny when they are exercised and the employee has become the legal owner of the property, time limits for assessing the value of the option may have elapsed.

All officers, whether dealing with the employer’s accounts or with returns and correspondence in the file of the employee concerned, should be on the alert for any indication that an option has been granted and take action at that time.