Taxation of Chargeable Gains Act 1992 section 148

Traded options: closing purchases

Section 148 deals with the capital gains tax treatment when the grantor of a traded option closes out that option by purchasing an equal and opposite traded option of the same description.

• When a grantor closes out a traded option by buying a matching option, any disposal involved in that closing out is disregarded for capital gains tax and corporation tax on chargeable gains purposes.
• The cost of acquiring the second option, plus any incidental costs of that acquisition, is added to the allowable incidental costs of granting the original option, thereby reducing the gain on the original grant.
• The grantor does not need to wait until the second option expires before obtaining relief — the adjustment applies at the point of closing out.
• The section applies to both put and call traded options, with "traded option" having the meaning given by section 144(8).