Income Tax (Earnings and Pensions) Act 2003

Exercise of options: scheme-related employment ends

34 (1) The scheme must provide that, if a participant (“P”) no longer holds scheme-related employment (see paragraph 35), the options are exercisable as set out in sub-paragraphs (2) to (4).

(2) In a case where P ceases to hold the scheme-related employment because of—

(a) injury or disability or redundancy within the meaning of ERA 1996, or

(b) retirement on reaching the specified age, or any other age at which P is bound to retire in accordance with the terms of P’s contract of employment,

the options may only be exercised within 6 months after the termination date.

(3) In a case where P ceases to hold the scheme-related employment for any other reason, share options granted more than 3 years before the termination date either—

(a) may not be exercised, or

(b) may only be exercised within 6 months after the termination date,

according to which of these alternatives is specified in the scheme.

(4) Subject to any provision made under sub-paragraph (5), in a case where P ceases to hold the scheme-related employment for any reason other than one within sub-paragraph (2)(a) or (b), share options granted 3 years or less before the termination date may not be exercised at all.

(5) The scheme may provide that, in a case where P ceases to hold the scheme-related employment only because—

(a) it is in a company of which the scheme organiser ceases to have control, or

(b) it relates to a business or part of a business which is transferred to a person who is not an associated company of the scheme organiser,

the options may be exercised within 6 months after the termination date.

(6) This paragraph has effect subject to paragraph 30(1)(b) (options must not be capable of being exercised later than 6 months after bonus date).

(7) In this paragraph—

• “scheme-related employment” means the office or employment by reference to which the person satisfies the condition in paragraph 10(1) (“the employment requirement”);

• “the termination date” means the date when P ceases to hold the scheme-related employment (see paragraph 35).