ERSM110500 - Securities Options: post-acquisition charges on options - post-Schedule 22 FA 2003

From 6 April 2008 and until 5 April 2015 the following instructions relate to UK-resident employees within Chapter 5. Other employees may be dealt with through the provisions of Chapter 3C (securities acquired for less than market value) (ERSM70000).

For options granted before 6 April 2008, only UK-resident and ordinarily resident employees are within Chapter 5. See ERSM160200.

From 6 April 2015, with the removal of the residence exclusion at ITEPA03/S474 (see ERSM20300), Chapter 5 can apply to securities options acquired whilst the employee is not resident in the UK and not carrying out duties in relation to a UK employment. See ERSM162000.

Chargeable events

ITEPA03/S477 (3) provides for the following chargeable events:

  1. the acquisition of securities pursuant to the employment-related securities option by an associated person,
  2. the assignment for consideration of the employment-related securities option by an associated person otherwise than to another associated person or the release for consideration of the employment-related securities option by an associated person, or
  3. the receipt by an associated person of a benefit in connection with the employment-related securities option (other than one within paragraph (a) or (b).

See ERSM110510 for details of the computation of option gains.

Exercise

»Ê¹ÚÌåÓýapp new rules do not specifically mention exercise, as they are designed to cover all situations where securities are acquired in pursuance of a right to acquire such securities - see above. »Ê¹ÚÌåÓýapp new wording also brings in, e.g. a Long-term Incentive Plan (LTIP), where there is a right under such a plan to receive shares after a period of time.

Other possible charge

When securities are acquired in connection with an employment-related securities option, tax could arise under Chapter 3A where the market value of the securities is artificially depressed.

Tax-advantaged option schemes

»Ê¹ÚÌåÓýappre are special rules relating to tax-advantaged share schemes: approved Save As You Earn (SAYE) schemes, approved Company Share Option Plans (CSOP) schemes and Enterprise Management Incentives (EMI). (ERSM300000)