Income Tax (Earnings and Pensions) Act 2003

Tax charge

526 Charge where option granted at a discount

(1) This section applies if, at the time when the share option is granted to the individual, the aggregate of—

(a) the amount or value of any consideration given by the individual for the grant of the option, and

(b) the amount payable by the individual, on exercising the option, in order to acquire the maximum number of shares that may be acquired under it,

is less than the market value of the same quantity of issued shares of the same class.

(2) The amount of the difference counts as employment income of the individual for the relevant tax year.

(3) The “relevant tax year” is the tax year in which the option is granted to the individual.

(4) The following provisions, namely—

(a) section 194 (amount of notional loan in respect of acquisition of shares for less than market value), and

(b) sections 479 and 480 (amount of gain realised by exercising, assigning or releasing option),

provide for deductions to be made to take account of amounts that count as employment income under this section.