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HMRC internal manual

National Insurance Manual

From
HM Revenue & Customs
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Class NICs: Share and share options acquired before 6 April 1999: Exercise of a share option after 6 April 1999 where the original right acquired before 6 April 1999

Paragraph 16 of Part 9 to Schedule 3 of the Social Security (Contributions) Regulations 2001

A payment by way of a gain from the exercise of a share option was brought into the scope of Class 1 NICs liability from 6 April 1999 but special rules apply where options granted before that date are exercised on or after 6 April 1999. Gains from the exercise of an option are disregarded in the calculation of earnings but only to the extent that the gains realised consist of the shares acquired. However, if -

  • the option is exercised after 10 April 2003; and
  • the market value of the shares is increased by more than 10% by things done, on or after 6 April 1999, otherwise than for genuine commercial purposes

then the only gain which can be disregarded in the calculation of earnings is the market value of the shares deriving from the option before the increase.