Taxation of Chargeable Gains Act 1992 section 144ZB

Exception to rule in section 144ZA

Section 144ZB provides an exception to the market value rule in section 144ZA where an option is exercised on a non-commercial basis, so that both parties are instead treated as transacting at the market value of the underlying asset at the time the option is exercised.

• Where an option is exercised non-commercially, the normal market value rule in section 144ZA is switched off and replaced with a deemed market value transaction at the date of exercise
• This exception does not apply to securities options falling within Chapter 5 of Part 7 of ITEPA 2003, nor where the value of the underlying subject matter has been artificially altered to obtain a tax advantage
• Whether the option obliges the grantor to buy or to sell, both the acquisition cost and the disposal consideration are deemed to equal the market value of the underlying asset at the time of exercise
• If the underlying asset is subject to any right or restriction enforceable by the disposer or a connected person, market value is determined as though that right or restriction did not exist