Taxation of Chargeable Gains Act 1992 Schedule 7D paragraph 10

Market value rule not to apply

Paragraph 10 disapplies the normal market value rule for capital gains purposes when shares are acquired through the exercise of options under an approved Save As You Earn (SAYE) share option scheme.

• When an employee or director exercises a share option granted under a Schedule 3 SAYE option scheme, the normal rule that treats disposals and acquisitions as made at market value does not apply — instead, the actual option price is used as the acquisition cost for capital gains purposes.
• The employing company does not need to be the same company whose shares are under option — it can be a different company within the group or arrangement.
• If a scheme loses its Schedule 3 SAYE status after an option has been granted but before it is exercised, the scheme is still treated as an approved scheme for the purposes of this relief, preserving the tax advantage.
• Where the original option holder has died, a person exercising the option under the scheme's death provisions is also covered by this relief, and the income tax conditions that would normally need to be met do not apply in those circumstances.