Income Tax Act 2007 section 257RB

Call options

Section 257RB deals with the consequences for social investment (SI) tax relief when an investor grants a call option over all or part of a qualifying investment.

• If an investor grants an option that would oblige them to sell all or part of a qualifying social investment, the grant itself is treated as a disposal of that investment or the relevant part.
• Because the grant is treated as a disposal, the rules in section 257R apply, which may lead to the withdrawal or reduction of SI relief previously claimed.
• This provision exists to prevent investors from effectively exiting their investment through granting call options while still retaining SI tax relief.
• The call option rules operate independently of the separate requirement that there must be no pre-arranged exits at the time the investment is made.