Tax is charged under Chapter 12 when there is a disposal of a
future or option. ITTOIA05/S562 explains when there is a disposal.
The rules essentially follow those in the capital gains tax
legislation. A disposal will be a disposal for the purposes of
Chapter 12 if it is a disposal within TCGA92. In particular, it
includes disposals within TCGA92/S143, TCGA92/S144 and TCGA92/S144A
although these sections are treated as amended in certain
areas.
TCGA92/S143 treats as disposals futures contracts which are closed out by entering into another contract or which are settled by payment.
TCGA92/S144 treats grants and abandonments of options (but not the exercise of an option) as disposals, and provides for premiums to be included in the computation of the gain or loss. See also SAIM7090 on when a future or option in these circumstances has been disposed of.
TCGA92/S144A provides that the exercise of an option which is settled by cash is treated as a disposal both in respect of the grantor of the option and the grantee. See also SAIM7090 on when a future or option in these circumstances has been disposed of.
Three assumptions apply in interpreting the TCGA rules.
Assumption A requires, for the removal of doubt, that all
futures are to be considered as assets in applying the TCGA
sections. (Options are already listed as chargeable assets in
TCGA92/S21(1).)
Assumption B requires TCGA92/S143 (5) and (6) to be read
without the words "in the course of dealing in commodity or
financial futures" since the range of futures transactions covered
by Chapter 12 extends beyond commodity and financial futures as
defined in TCGA92/S143.
Assumption C is a special timing rule. It requires
TCGA92/S144 to be read as excluding only listed options, and
therefore extends the provisions of that section to cover options
that would otherwise be excluded under the definition in subsection
144(8) of TCGA92. These listed options are referred to as
‘traded options’ in the predecessor legislation in
ICTA88/SCH5AA. Listed here means listed at the time of disposal.
The rules in ITTOIA05/S562 are subject to two further timing
rules, in sections 563 and 564.
