Income Tax (Earnings and Pensions) Act 2003 section 483

Application of this Chapter where option exchanged for another

Section 483 sets out the rules that apply when an employment-related securities option is given up in exchange for a new securities option, including how to calculate the cost base of the new option and when multiple transactions are treated as a single exchange.

• When an old employment-related securities option is assigned or released and a new securities option forms all or part of the consideration, the new option is not treated as consideration for calculating the gain on the old option
• The same tax rules that applied to the old option continue to apply to the new option, ensuring continuity of treatment under the securities options regime
• The cost base of the new option is calculated as the original cost of the old option, minus any non-option consideration received for giving up the old option, plus any additional valuable consideration paid for the new option beyond the old option itself
• Two or more separate transactions will be treated as a single option exchange if they result in a person (or a connected person) swapping one option for another, and at least one transaction is carried out under arrangements involving two or more option holders who may be liable to tax under this Chapter, regardless of the order in which the transactions occur