Corporation Tax Act 2009 section 653

Shares issued or transferred as a result of exercise of deemed option

Section 653 determines how to calculate the consideration for shares issued or transferred when a deemed option embedded in a derivative contract is exercised, for the purposes of chargeable gains.

• When the deemed option within section 652 is exercised and shares are issued or transferred, the transaction is treated as a single disposal for chargeable gains purposes
• The consideration for the grant of the option is taken to be the tax-adjusted carrying value of the option at the time the company first became a party to the relevant debtor relationship
• The grant of the option and the share transfer are linked together as one transaction, with the option consideration forming part of the overall disposal consideration
• The normal market value rule that would otherwise apply to the share transfer is disapplied, so the actual contractual figures are used instead