Taxation of Chargeable Gains Act 1992 Schedule A1 paragraph 13

Rules for options

Paragraph 13 of Schedule A1 sets out how the taper relief rules apply where a chargeable gain or allowable loss arises from the disposal of an option or from the disposal of an asset acquired through the exercise of an option.

• When an option is disposed of (without being exercised), the qualifying holding period for taper relief purposes begins when the option was acquired, not when it is disposed of.
• When an option is exercised and the underlying asset is later disposed of, the qualifying holding period for taper relief begins from the date the option was originally acquired, rather than from the date the option was exercised or the asset obtained.
• The nature of the asset for taper relief purposes — whether it is a business asset or a non-business asset — is determined by reference to the underlying asset acquired on exercise of the option, not by reference to the option itself.
• These rules ensure that the holding period for taper relief reflects the full economic period of ownership, starting from when the taxpayer first committed capital by acquiring the option.