Income Tax (Earnings and Pensions) Act 2003

Tax advantages: exercise of optionU.K.

529Scope of tax advantages: option must be exercised within 10 yearsU.K.

(1)Sections 530 to 540 apply in connection with the exercise of a qualifying option.

(2)But those sections only apply in cases where the option is exercised on or before the tenth anniversary of—

(a)the date of the grant of the option, or

(b)if it is a replacement option, the date of the grant of the original option.

(3)In the EMI code “the original option” means—

(a)where there has been one replacement option, the option that that option replaced, or

(b)where there have been two or more replacement options, the option that the first of them replaced.

530No charge on exercise of option to acquire shares at market valueU.K.

(1)This section applies if the option is to acquire shares at not less than their market value—

(a)at the time when the option is granted, or

(b)if it is a replacement option, at the time when the original option was granted.

(2)If this section applies, no liability to income tax arises by virtue of section 476 (charge on exercise etc. of option by employee) in respect of the exercise of the option.

(3)This section has effect subject to section 532 (modified tax consequences following disqualifying events).

531Limitation of charge on exercise of option to acquire shares below market valueU.K.

(1)This section applies if the option is to acquire shares at less than their market value—

(a)at the time when the option is granted, or

(b)if it is a replacement option, at the time when the original option was granted,

or at nil cost.

(2)If this section applies, the section 476 gain is—

(3)“The chargeable market value” means—

(a)the market value of the shares—

(i)at the time when the option was granted, or

(ii)if it is a replacement option, at the time when the original option was granted, or

(b)the market value of the shares at the time when the option is exercised,

whichever is lower.

[F2(3A)Sections 226B to 226D (deemed payment for acquisition of employee shareholder shares) provide for the determination of the amount, if any, for which employee shareholder shares (within the meaning of section 226A(6)) are acquired.]

(4)In this section “the section 476 gain” means the amount [F3under section 478 (amount of charge under section 476) is to be regarded as the taxable amount for the purposes of section 476 in respect of the acquisition of the shares pursuant to the option.]

(5)This section has effect subject to section 532 (modified tax consequences following disqualifying events).