Taxation of Chargeable Gains Act 1992 section 144ZC

Section 144ZB: non-commercial exercise of option

Section 144ZC defines what constitutes a "non-commercial" exercise of an option for the purposes of the rules in section 144ZB concerning options over assets.

• A put option (binding the grantor to buy) is exercised non-commercially if the exercise price is below the open market price of the asset bought; a call option (binding the grantor to sell) is exercised non-commercially if the exercise price exceeds the open market price of the asset sold
• The exercise price is the consideration receivable or payable on exercise of the option, excluding any amount paid to acquire the option itself
• The open market price is what the underlying asset would reasonably be expected to fetch on the open market at the time of exercise, ignoring any rights or restrictions enforceable by the disposing party or a connected person
• Special valuation rules apply: the open market price must not be reduced on the assumption that all assets are placed on the market simultaneously, and for unquoted shares and securities it is assumed that all relevant information is available to a prospective purchaser