Taxation of Chargeable Gains Act 1992 Schedule B1 paragraph 3

Grants of options

Paragraph 3 of Schedule B1 deals with how the grant of an option is treated for capital gains tax purposes when the option relates to an asset that qualifies for investors' relief.

• When a person grants an option over an asset that is eligible for investors' relief, the grant of that option is treated as a separate transaction from any subsequent disposal of the underlying asset.
• The consideration received for granting the option is treated as a disposal in its own right, and the normal capital gains tax rules apply to determine whether a chargeable gain arises on that grant.
• If the option is subsequently exercised, the grant and the exercise are treated as distinct events, each with their own tax consequences, rather than being merged into a single transaction.
• This treatment ensures that investors' relief applies correctly to the underlying asset disposal, while the option grant itself is taxed according to standard principles.