Income Tax (Earnings and Pensions) Act 2003 Schedule 4 paragraph 27

Requirements about share options granted in exchange

Section 27 sets out the conditions that must be met when new share options are issued in exchange for old ones following a company reorganisation under a CSOP scheme.

• New options must relate to shares in a different company from the one whose shares were subject to the old options — either the acquiring company or a company that controls, or is part of a consortium owning, the scheme organiser.
• The new options must be equivalent to the old ones: the shares must meet the qualifying share conditions, the options must be exercisable in the same way, and both the total market value and the total exercise price must be substantially the same.
• For CSOP purposes, the new options are treated as having been granted at the same time as the original old options.
• Market value must be calculated ignoring any restrictions on the shares, and the valuation methodology must be one agreed with HMRC.