Finance Act 2001

Income tax charge arising on disqualifying event

11 (1) Paragraph 53 (effect of disqualifying event) is amended as follows.

(2) For sub-paragraph (2) substitute—

“(2) Where paragraph 44 applies (option to acquire shares at market value), then for the purposes of section 135 of the Taxes Act 1988 (taxation of share options) the amount of the gain realised on the exercise of the option is taken to be—

(a) the post-event gain (if any), less

(b) the amount or value of the consideration given for the grant of the option.

(2A) Where paragraph 45 applies (option to acquire shares at less than market value), then for the purposes of section 135 of the Taxes Act 1988 (taxation of share options) the amount of the gain realised on the exercise of the option is taken to be—

(a) the aggregate of—

(i) the chargeable market value (within the meaning of that paragraph), and

(ii) the post-event gain, less

(b) the aggregate of—

(i) the amount or value of the consideration given for the grant of the option, and

(ii) the amount for which the shares are acquired.

(2B) Where paragraph 46 applies (option to acquire shares at nil cost), then for the purposes of section 135 of the Taxes Act 1988 (taxation of share options) the amount of the gain realised on the exercise of the option is taken to be—

(a) the aggregate of—

(i) the chargeable market value (within the meaning of paragraph 45), and

(ii) the post-event gain, less

(b) the amount or value of the consideration given for the grant of the option.

(2C) For the purposes of this paragraph “the post-event gain” means the amount (if any) by which—

(a) the market value of the shares when the option is exercised, exceeds

(b) their market value immediately before the disqualifying event.

(2D) Where—

(a) the amount of the gain realised on the exercise of an option falls to be determined under sub-paragraph (2), (2A) or (2B) above, and

(b) the amount mentioned in paragraph (b) of the sub-paragraph concerned exceeds the amount mentioned in paragraph (a) of that sub-paragraph,

no amount is chargeable to income tax under section 135 of the Taxes Act 1988 (taxation of share options) in respect of the exercise of the option.”

(3) In sub-paragraph (3) for “sub-paragraph (2)” substitute “sub-paragraphs (2), (2A) and (2B)”.