Taxation of Chargeable Gains Act 1992 section 144ZD

Section 144ZB: alteration of value to obtain tax advantage

Section 144ZD is an anti-avoidance rule that prevents the normal option exercise treatment under section 144ZB from applying where the value of the option's underlying subject matter has been deliberately altered through arrangements designed to obtain a capital gains tax or corporation tax advantage.

• This section applies where the open market price of the underlying subject matter of an option has changed between the date of grant and the date of exercise, and that change results directly or indirectly from arrangements involving a relevant person (the grantor, any holder, or a connected person).
• If the price change caused by the arrangements were stripped out, the exercise of the option would not be considered non-commercial — meaning the arrangements are what make it appear non-commercial.
• The grantor or the person exercising the option must obtain, or be expected to obtain, a tax advantage in relation to capital gains tax or corporation tax on chargeable gains as a result of the arrangements.
• A tax advantage includes obtaining relief, avoiding or reducing a tax charge, deferring a tax payment, or advancing a tax repayment — and arrangements are widely defined to include any agreement, understanding, scheme or series of transactions, whether legally enforceable or not.