Taxation of Chargeable Gains Act 1992 section 147

Quoted options treated as part of new holdings

Section 147 deals with how quoted options to subscribe for shares are treated when a company undergoes a reorganisation, conversion, or similar corporate event, ensuring the options are folded into the new holding without triggering an immediate capital gains tax charge.

• A quoted option traded within 3 months of a corporate reorganisation (or longer if HMRC allows) is treated as the underlying shares that could be acquired by exercising it, bringing it within the share reorganisation rules
• Because the option is treated as part of the new holding, no disposal is deemed to occur at the time of the reorganisation, so no capital gains tax arises until the option is ultimately sold or the shares acquired on exercise are disposed of
• The market value of the quoted option, where needed, is determined under section 272(3), which provides a general valuation basis for quoted securities
• The section applies to common corporate events such as rights issues, bonus issues, and takeovers where the acquiring company issues securities and quoted options in exchange for the shares it acquires