Securities Options: legislation: overview of liability
From 6 April 2008 until 5 April 2015 the legislation only applies to employees resident in the UK at the time of grant of the option see ERSM20300.
Other employees acquiring securities through options will be chargeable within the provisions of Chapter 3C Part 7 ITEPA (securities acquired for less than market value).
From 6 April 2015 the residence exclusions in Part 7 of ITEPA03 have been removed. See [ERSM160000](https://www.gov.uk/hmrc-internal-manuals/employment-related-securities/ersm160000) and in particular [ERSM162000](https://www.gov.uk/hmrc-internal-manuals/employment-related-securities/ersm162000).
The residence rules applying to securities options acquired before 6 April 2008 are at ERSM160200.
Person acquiring option
Any person may acquire the option where the right or opportunity to acquire is by reason of the employee’s employment. It will be the employee who suffers any charges - see associated person in ERSM20250.
By reason of employment
Former and prospective employments
Where former or prospective employees are granted options, per ITEPA03/S471 (2), there will still be a potential liability, but see ERSM20360 for exceptions.
Grant of option
There are no charges on the grant of an option, except in certain special circumstances - see ERSM110110
There are three potential events when a tax charge might arise in relation to a securities option (ERSM110500):
- When securities are acquired in connection with the right, typically by exercising the option, but this would also include acquiring securities on the vesting of a right such as an LTIP.
- If it is assigned or released in exchange for money or other valuable consideration.
- If a benefit is received in connection with it.
Exchanges of options
A roll-over relief is provided where one option is exchanged for another. See ERSM110800.
Tax-advantaged option schemes
There are different rules relating to tax-advantaged share schemes: Schedule 3 SAYE schemes (ITEPA03/S519), Schedule 4 CSOP schemes (ITEPA03/S524) and Enterprise Management Incentives (EMI) (ITEPA03/S530). (ERSM300000)