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HMRC internal manual

Employment Related Securities Manual

From
HM Revenue & Customs
Updated
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Securities Options: exchange of one option for another

If an employee sells or gives up the option in return, or partly in return, for another option, a charge to Income Tax arises when the second option is exercised, not when the first option is sold or given up. The relief is set out in ITEPA03/S483.

If an employment-related securities option is assigned or released, and the whole or part of the consideration for this assignment or release is a new option, the new option is not treated as consideration given for the old option when calculating the amount of gain in accordance with ERSM110500.

The amount given for the acquisition of the new option that will qualify as a deductible amount is:

  • the amount of consideration given for the acquisition of the new option (other than the old option itself) and
  • the amount of consideration given for the acquisition of the old option, less any amount received for the assignment or release of that option (other than the new option itself).

Two or more transactions taking place when one option is received for another are to be treated as a single transaction, irrespective of the order in which the transactions occur.

The charging provisions in ITEPA03/S471 - ITEPA03/S482 apply to the new option as they apply to the old option.