Income Tax (Earnings and Pensions) Act 2003 section 421I

Consideration for acquisition of employment-related securities

Section 421I sets out how to determine the amount of consideration given when employment-related securities are acquired, for the purposes of the tax charges in Chapters 2 to 3A.

• Consideration means what the employee (or whoever actually acquired the securities) paid or gave in exchange for obtaining them.
• The total consideration includes any amount paid for a right (i.e. an option) to acquire the securities, not just the amount paid when the securities themselves are obtained.
• Where a new option is received in exchange for giving up or assigning an old option, the consideration for the new option is calculated by adding together the unrecovered cost of the old option and any additional valuable consideration given for the new option.
• Multiple linked transactions can be treated as a single exchange of one option for another, provided they form part of arrangements involving two or more option holders who may be liable to tax under the securities options rules in Chapter 5.