| Financial Benefits to Encourage Employee Participation |
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value totalling £1,750 m; the average per employee was £25,000 and the cost of the tax relief was £70 m; in 1997–1998 the figures were 330,000, £1,070 m and £3,300 and £100 m.157 |
16A.8.2 Approved Company Share Option Schemes or CSOPs |
16A.8.2.1 Benefits of Approval |
No charge on exercise; CGT on disposal. Where an option is granted under an approved scheme, no charge arises on the exercise of the option provided it is exercised not less than 3 or more than 10 years after the grant, nor within 3 years of a similar exercise.158 Instead, a charge to CGT arises on the disposal of the shares on the difference between the full cost of the option shares and the disposal proceeds. |
16A.8.2.1.1 Charge on grant at discount Thanks to ITEPA section 475 no tax charge arises on the grant of the option but section 475 makes itself subject to section 526. Where the amount or value of the consideration given for the option and the price payable under it is less than the market value of the shares at that time, ie the difference is taxable as share related income and treated as employment income.159 The right under an option to acquire shares at a discount of up to 15% of market value was abolished by FA 1996 as part of the reaction against gains being made by certain executives following privatisation.160 The amount chargeable to income tax is treated as allowable expenditure when the gain is calculated on the disposal of the shares.161 |