38 |
16A.7.2 Tax Treatment |
If these conditions are met, no charge arises on the grant of the option.152 No income tax liability charge arises on the exercise of the option unless it is exercised within 3 years of the grant.153 Certain exercises within that period, eg when that scheme ends, are also exempt.154 Special rules may apply if the company is taken over, or some similar event occurs.155 |
16A.8 Approved Company Share Option Schemes CSOPs ITEPA Part 7 Chapter 8, Sections 521–526 and Schdule 4 |
16A.8.1 Background |
A survey showed that whereas in 1987, 90% of companies had approved schemes compared with 10% that had unapproved schemes, by 1996, 80% of companies had approved schemes compared with 85% unapproved.156 Explanations included the 1988 equalisation of tax rates for CGT and income tax and the 1996 reduction in the limit for approved schemes to options over shares with a market value of £30,000. Another explanation was the 1996 rule that schemes had to be open to all employees, which applied as from 1996 and did not affect existing options. Symbolically—and accurately—the 1996 rule changes meant that schemes which had previously been called ‘discretionary’ schemes were instead called ‘company’ share schemes. In 1993–1994, 70,000 employees received options over shares with an initial |