How is consideration treated when a qualifying share option is rolled over under section 1022?

Any consideration paid by the option holder to obtain the new option is treated as consideration paid for the original qualifying option. Consideration paid to acquire shares under the new option is likewise treated as paid under the original option. However, the surrender of the original option itself is excluded from this calculation to avoid double-counting.

What is a qualifying successor company under section 1022?

The company whose shares are subject to the new option is recognised as a qualifying successor company. This status ensures the replacement shares satisfy condition 3 in section 1016, which sets out qualifying conditions for shares acquired. It allows the new shares in the acquiring company to meet the necessary requirements for corporation tax relief.

Can you give an example of how the section 1022 rollover works in practice?

If Company A grants a qualifying share option and Company B acquires Company A, the option holder can exchange the original option for a new option over Company B shares. Under section 1022, the new option is treated as the original, any consideration paid transfers accordingly, and Company B becomes a qualifying successor company for relief purposes.

Corporation Tax Act 2009 section 1022

Q: What does section 1022 of the Corporation Tax Act 2009 do?

Section 1022 provides continuity of corporation tax relief when a company takeover disrupts an existing qualifying share option. Where the option holder exchanges the original option for a new option over shares in the acquiring company, the new option is treated as the original qualifying option, preserving the tax relief under Chapter 3 of Part 12.

Takeover of company whose shares are subject to option

Section 1022 deals with what happens to a qualifying share option when the company whose shares are under option is taken over, and the option holder exchanges the original option for a new option over shares in the acquiring or successor company.

Where a company subject to a qualifying share option is taken over, the option holder may release the original option in exchange for a new option over shares in a qualifying company, by agreement with the acquiring company
The tax relief rules in Chapter 3 then treat shares acquired under the new option as if they had been acquired under the original qualifying option, preserving the relief
The company whose shares are subject to the new option is treated as a qualifying successor company for the purposes of the conditions relating to shares acquired under section 1016
Any consideration paid for the new option or for shares acquired under it is treated as consideration paid for the original qualifying option or its shares, but the consideration given to release the original option rights is excluded from this calculation

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