Taxation of Chargeable Gains Act 1992 section 149A

Employment-related securities options

Section 149A disapplies the market value rule for capital gains tax purposes when an employment-related securities option is granted, so that only the actual consideration paid is used in the computation.

• The section applies to securities options granted on or after 16 March 1993 that fall within the employment-related securities options rules in ITEPA 2003 and where the market value rule in section 17(1) TCGA 1992 would otherwise substitute market value for the actual consideration.
• Both the person granting the option and the employee or director receiving it are treated as if the market value rule does not apply, so the consideration used for capital gains tax purposes is the actual amount paid (if any) for the grant of the option.
• If the option is granted wholly or partly in recognition of services or past services in an office or employment, the value of those services is ignored when determining the actual consideration — it does not inflate the figure used in the capital gains computation.
• The practical effect is that where an employee pays nothing, or pays less than market value, for the grant of an option, the capital gains base cost for the employee and the disposal proceeds for the grantor reflect that actual payment rather than the market value of the option.