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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 replacement share option on or after 1 September 2003 where the original option was obtained before 6 April 1999

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

Gains realised by the exercise of a replacement share option, where the original right was obtained before 6 April 1999, are disregarded in the calculation of earnings unless:

  • the market value of the shares obtained by the exercise of the replacement right, less any consideration that would have to be given, is substantially greater than the market value of the shares subject to the original right, immediately before their release or assignment, less any consideration given; or
  • the market value of the shares has been increased by more than 10% by things done, on or after 6 April 1999, otherwise than for genuine commercial reasons.

If paragraph 16A applies, all that can be disregarded from earnings is the value of the shares acquired by the exercise of the replacement right.