ESSUM48200 – Taxation: Income
tax consequences for participants
Section 524 ITEPA 2003 provides favourable tax treatment for
options granted and exercised under approved CSOP schemes in
certain circumstances.
Section 524 sets out the conditions to obtain income tax
relief when employees and directors acquire shares by virtue of
exercising approved CSOP options:
- The individual exercises the option in
accordance with the provisions of the CSOP scheme at a time when
the scheme remains approved and either condition A or B is
met:
- Condition A is that option is exercised on after
the 3rd anniversary of the date of grant and not later than the
10th anniversary of that date
- Condition B is that option is exercised before the
3rd anniversary of the date of grant and is so exercised by virtue
of a “good leaver” provision included in the scheme
(see
ESSUM44400)
- The avoidance of tax or national insurance
contributions is not the main purpose (or one of the main purposes)
of any arrangement under which the option was granted or
exercised
Chapter 8 of Part 7 of Income Tax (Earnings and Pensions) Act
2003 provides for the approval of CSOP schemes, for exemptions to
income tax for share options granted under those schemes and for
amounts to count as employment income in certain circumstances in
connection with such options.
