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HMRC internal manual

Employment Related Securities Manual

Securities Options: non-deductible amounts

Actual and notional selling costs

No deduction is available for either actual or notional selling costs. Actual selling costs will be deductible in computing any Capital Gains Tax profit or loss on disposal of the securities. This rule applies to brokerage fees, etc, incurred in “cashless exercises” (see ERSM220060) as it does to other sales.

Fall in value of shares

No concession is available if the value of the shares falls after the exercise of the option and before the employee sells them. The full gain calculated by reference to the market value of the shares at the exercise date remains chargeable to Income Tax and NICs.

However, the employee will in these circumstances generally have a Capital Gains Tax loss when the shares are sold, as the consideration given for the shares will consist of the price paid for the shares plus the amount charged to Income Tax.

Value of services

The value of the services given by the employee in performing the duties of the employment cannot be counted as consideration given for the option.