Taxation of Chargeable Gains Act 1992 Schedule 7D paragraph 13

Market value rule not to apply

Paragraph 13 disapplies the normal market value rule for capital gains purposes when shares are acquired through the exercise of a qualifying CSOP scheme option, so that the actual price paid is used instead.

• When a CSOP option is exercised in accordance with an approved Schedule 4 CSOP scheme and no income tax charge arises on exercise, the normal market value rule is switched off.
• The acquisition cost of the shares for capital gains purposes is the actual price paid under the option, not the market value at the date of exercise.
• Similarly, any corresponding disposal of shares to the option holder is treated as made for the actual consideration, not market value.
• The same treatment applies where the option is exercised following the death of the option holder, under the scheme's death provisions.