ERSM302200 - SAYE Option Schemes: Chapter 7 Part 7 ITEPA 2003 Approved SAYE Option Schemes

This Chapter provides for the approval of SAYE option schemes, for exemptions from Income Tax in connection with the options granted under those schemes and for amounts to count as employment income in certain circumstances in connection with such options. The requirements for approval are set out in Schedule 3 (see below). The circumstances in which the gain from the exercise of the option is exempt from income tax are in section 519, and are, briefly:

• option is exercised in accordance with the scheme rules at a time when the scheme remains approved and
• the transaction is not part of any arrangement in which one of the main purposes is to avoid tax or NIC and

either the option is exercised on or after the third anniversary of the date of grant or the option is exercised within three years of the date of grant for a “good leaver” reason (or by virtue of attaining the retirement age and remaining in employment). A “good leaver” is a participant who has ceased to be an eligible employee by reason of injury, disability, redundancy or retirement. In these circumstances exercise must occur within 6 months of cessation (or on reaching the retirement age). Section 519 does not affect the operation of section 477(4) which provides for tax relief when the option is exercised by the personal representative of a participant who has died.

Unless options are exercised in these specific circumstances then income tax will be due in respect of the gain arising from the chargeable event (ERSM110500). Shares acquired under a SAYE option scheme are excluded from the definition of an asset (section 701(2)(c)(i) and income tax should be dealt with under self assessment.