Finance Act 2003

158Application of market value rule in case of exercise of optionU.K.

(1)In Chapter 3 of Part 4 of the Taxation of Chargeable Gains Act 1992 (c. 12) (miscellaneous provisions relating to options and other matters), after section 144 insert—

144ZAApplication of market value rule in case of exercise of option

(1)This section applies where—

(a)an option is exercised, so that by virtue of section 144(2) or (3) the grant or acquisition of the option and the transaction resulting from its exercise are treated as a single transaction, and

(b)section 17(1) (“the market value rule”) applies, or would apply but for this section, in relation to—

(i)the grant of the option,

(ii)the acquisition of the option (whether directly from the grantor or not) by the person exercising it, or

(iii)the transaction resulting from its exercise.

(2)If the option binds the grantor to sell—

(a)the market value rule does not apply for determining the consideration for the sale, except, where the rule applies for determining the consideration for the option, to that extent (in accordance with section 144(2)(a));

(b)the market value rule does not apply for determining the cost to the person exercising the option of acquiring what is sold, except, where the rule applies for determining the cost of acquiring the option, to that extent (in accordance with section 144(3)(a)).

(3)If the option binds the grantor to buy—

(a)the market value rule does not apply for determining the cost of acquisition incurred by the grantor, but without prejudice to its application (in accordance with section 144(2)(b)) where the rule applies for determining the consideration for the option;

(b)the market value rule does not apply for determining the consideration for the disposal of what is bought, but without prejudice to its application (in accordance with section 144(3)(b)) where the rule applies for determining the cost of the option.

(4)To the extent that, by virtue of this section, the market value rule does not apply for determining an amount or value, the amount or value to be taken into account is (subject to section 120) the actual amount or value.

(5)In this section “option” has the same meaning as in section 144..

(2)This section applies in relation to the exercise of an option on or after 10th April 2003.