CG56384 - Shares and securities: employee share schemes: employment-related securities: securities options and the employee
The Capital Gains Tax consequences for an employee depends on what happens to the securities option (²õ±ð±ð CG56321).
The option may be:
exercised
assigned or released
not exercised and allowed to lapse
Each situation is explained below.
When the option is exercised
If the option is exercised, the grant of the option and the issue or transfer of shares on exercise of the option are treated as forming a single transaction (s±ð±ð CG12313). The cost of the securities acquired by the employee on exercise of the option depends on the date of exercise.
If the employee exercises the option after 9 April 2003 the cost of the securities is the total of
the amount actually paid by the employee for the option (or its market value at the date of grant if granted before 28 November 1995)
the amount paid by the employee for the securities on exercise of the option
any amount counting as income on exercise of the option under . S±ð±ð  andCG56328.
If the employee exercised the option before 10 April 2003 the cost of the shares acquired by the employee on exercise is the market value of the shares at the date of exercise.
S±ð±ð CG56321.
Income Tax relief is given where the employee agrees with the employer to pay part or the whole of any employer's National Insurance Contributions when the option is exercised. This Income Tax relief will not reduce the amount allowable as an addition to the cost of the securities for capital gains purposes. Amounts that count as employment income of the employee under as a result of exercising the option will still be allowable in full under . 
If remittance basis applies to an amount counting as income, ²õ±ð±ð CG25395.
When the option is assigned or released
The assignment or release of an option is a disposal of the option for Capital Gains Tax purposes. The release of an option includes its surrender, or cancellation. However, where applies, any consideration for the assignment or release counts as employment income. then has the effect that there is no disposal consideration to be brought into the CGT computation.
When the option is not exercised and lapses
If the option is not exercised, and simply lapses, there is no allowance to the employee for any amounts paid for the grant of the option, ²õ±ð±ð CG12340.