• Option A acquired on 6 February 1999 - market value of shares equal to exercise price
• Option A exercised on 10 May 2003 - employee acquired shares and £1 in cash per share

The gains on exercise of the share option, i.e. market value of shares acquired less price paid to acquire the shares plus cash, are treated as earnings under Section 4(4)(a) SSCBA 1992 if chargeable to tax under s135 of ICTA 1988 but Class 1 NICs are not due.

All the gains are disregarded from earnings under paragraph 16, Part 1X, Schedule 3, SSCR 2001.