Income Tax (Earnings and Pensions) Act 2003 Schedule 4 paragraph 22

Requirements as to price for acquisition of shares

Schedule 4 paragraph 22 sets out the rules governing the minimum exercise price for share options granted under a Company Share Option Plan (CSOP) and the permitted adjustments when changes occur to the company's share capital.

• The option exercise price must not be manifestly less than the market value of shares of the same class at the time the option is granted, or at an earlier time determined under HMRC guidance.
• The scheme may allow the exercise price, the number of shares, or the description of shares under option to be adjusted to reflect a variation in the company's share capital.
• Any such adjustment must ensure that the total market value of the shares under option and the total exercise price both remain substantially the same before and after the adjustment.
• Where shares are subject to a restriction, their market value for these purposes is determined as if the restriction did not exist.