[F1554Z7Exercise price of share optionsU.K.
(1)Subsection (3) applies if—
(a)the relevant step is a step within section 554B (other than one treated as being taken by section 554L(5), (7) or (9) or 554M(4), (6) or (8)),
(b)B is a company,
(c)there is an arrangement (“B's employee share scheme”) under which, in respect of A's employment with B, a right (“a relevant share option”) may be granted to A—
(i)to acquire relevant shares, or
(ii)to receive a sum of money the amount of which is to be determined by reference to the market value of any relevant shares at the time the sum is to be paid,
(d)in order to exercise the relevant share option so as—
(i)to acquire the relevant shares, or
(ii)to receive the sum of money,
A would, under the terms of the option, have to pay a sum of money the amount of which can be determined at the time of the grant of the option,
(e)the subject of the relevant step is relevant shares (“earmarked shares”) which are earmarked, or otherwise start being held, solely with a view to providing shares, or paying a sum of money, pursuant to—
(i)a relevant share option granted to A under B's employee share scheme as mentioned in paragraph (c) in relation to which the requirements of paragraph (d) are met, or
(ii)a relevant share option which is expected to be granted to A under B's employee share scheme as mentioned in paragraph (c) and in relation to which the requirements of paragraph (d) would be met,
(f)the number of relevant shares of any type which are earmarked shares does not exceed the maximum number of relevant shares of that type which might reasonably be expected to be needed for providing shares, or paying a sum of money, pursuant to the relevant share option which is granted or expected to be granted, and
(g)there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.
(2)Subsection (3) also applies if—
(a)the relevant step is a step treated as being taken by section 554L(9) or 554M(8), and
(b)in order to exercise the relevant share option to which the step relates so as—
(i)to acquire the shares which are the subject of the relevant step, or
(ii)to receive the sum of money determined by reference to the market value of those shares,
A would, under the terms of the option, have to pay a sum of money the amount of which can be determined at the time the option is granted.
(3)The value of the relevant step (after any reductions under sections 554Z4 to 554Z6) is to be reduced (but not below nil) by—
(a)the amount of the sum of money which A would have to pay as mentioned in subsection (1)(d) or (2)(b), or
(b)if the value of the relevant step was reduced under section 554Z4, X% of the amount of that sum of money.
(4)In subsection (3)(b) “X%” means the proportion of the value of the relevant step (as determined under section 554Z3) left after the reduction under section 554Z4.
(5)If subsection (3) applies by virtue of subsection (1) and the relevant step is taken in relation to an expected grant of a relevant share option as mentioned in subsection (1)(e)(ii), subsection (7) applies if—
(a)the grant is not made before the end of the date (“the final grant date”) falling immediately after the period of three months starting with the date on which the relevant step is taken, and
(b)as at the end of the final grant date, any of the earmarked shares continue to be held by or on behalf of P solely on the basis mentioned in subsection (1)(e).
(6)If subsection (3) applies by virtue of subsection (1), subsection (7) also applies if at any time after the taking of the relevant step—
(a)any of the earmarked shares cease to be held by or on behalf of P solely on the basis mentioned in subsection (1)(e), but
(b)the shares continue to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b).
(7)This Part has effect as if a relevant step within section 554B were taken at the end of the final grant date or when the shares cease to be held as mentioned in subsection (6)—
(a)the subject of which is the earmarked shares mentioned in subsection (5)(b) or (6), and
(b)by reason of which this Chapter is to apply (subject only to section 554A(4)).
(8)In this section “relevant shares” has the meaning given by section 554I(4).]
Textual Amendments
F1Pt. 7A inserted (with effect in accordance with Sch. 2 paras. 52-59 of the amending Act) by Finance Act 2011 (c. 11), Sch. 2 para. 1