ERSM110560 - Securities Options
Exercise of EMI options
Gain on exercise of EMI options granted at discount
For Enterprise Management Incentives, where a gain arises on the exercise of discounted options or after a disqualifying event, per ITEPA03/S531 the gain under ITEPA03/S476 becomes:
CMV - (ACO + ACS)
where-
CMV is the chargeable market value,
ACO is the amount or value of the consideration given for the grant of the option, and
ACS is the amount, if any, for which the shares are acquired.
The “chargeable market value" means-
- the market value of the shares-
- at the time when the option was granted, or
- if it is a replacement option, at the time when the original option was granted, or
- the market value of the shares at the time when the option is exercised,
whichever is lower.
Gain on EMI option following disqualifying event
For Enterprise Management Incentives, where a gain arises more
than 40 days after a disqualifying event, per ITEPA03/S532 the gain
under ITEPA03/S476 becomes:
If the option is within ITEPA03/S530 (1) (option to
acquire shares at market value), the gain is-
PEG - ACO
If the option is within section 531(1) (option to acquire shares at less than market value), the gain is-
(CMV + PEG) - (ACO + ACS)
where
ACO is the amount or value of the consideration given for the grant of the option,
ACS is the amount, if any, for which the shares are acquired,
CMV is the chargeable market value (as defined by section 531(3)), and
PEG is the post-event gain, that is the amount (if any) by which the market value of the shares at the time when the option is exercised exceeds their market value immediately before the disqualifying event.
