Part 7

Employment income: share-related income and exemptions
Chapter 9

Enterprise management incentives

Tax advantages where disqualifying events

Modified tax consequences following disqualifying events
532
1
This section applies where—
a
a disqualifying event (see section 533) occurs in relation to a qualifying option before the option is exercised, and
b
the option is exercised later than 40 days after the day on which the event occurred.
2
If the option is within section 530(1) (option to acquire shares at market value), the section 476 gain is—
PEG - ACO
(see subsection (4)).
3
If the option is within section 531(1) (option to acquire shares at less than market value), the section 476 gain is—
(CMV + PEG) - (ACO + ACS)
(see subsection (4)).
4
For the purposes of subsections (2) and (3)—
- ACO is the amount or value of the consideration given for the grant of the option,
- ACS is the amount, if any, for which the shares are acquired,
- CMV is the chargeable market value (as defined by section 531(3)), and
- PEG is the post-event gain, that is the amount (if any) by which the market value of the shares at the time when the option is exercised exceeds their market value immediately before the disqualifying event.
5
In those subsections “the section 476 gain” means the amount which is to be regarded for the purposes of section 476 (charge on exercise etc. of option by employee) as the amount of the gain realised by exercising the option.
6
Nothing in the following provisions—
a
subsections (2) and (3) above, or
b
sections 530 and 531,
applies if the amount that counts as employment income by virtue of section 476 in respect of the exercise of the option would, in the absence of those provisions, be less than the amount that counts as such income as a result of those provisions.