Taxation of Chargeable Gains Act 1992 section 237A

Share option schemes: release and replacement of options

Section 237A deals with the capital gains tax treatment when an employment-related share option is released and replaced with a new share option, ensuring that the exchange itself does not trigger a chargeable gain.

• When a director or employee releases an old share option in exchange for a new one (over shares in the same or a different company), the new option is not treated as consideration for the release of the old option for capital gains tax purposes.
• The cost base of the new option inherits the original cost of the old option, so the individual's allowable expenditure carries over to the replacement option.
• Any additional amount actually paid for the new option is treated as allowable expenditure for capital gains tax purposes.
• From the grantor's perspective, the release of the old option is ignored when calculating any consideration received for granting the new option, so no chargeable gain arises on the grant where the only consideration is the release of the old option.