CG55445 - Quoted options to subscribe for shares: position of purchaser
The issue of a quoted option to subscribe for shares by a company represents the grant of an option to which the rules of TCGA92/S144 apply, see CG12300+. Thus:
Option exercised
If the option is exercised the cost of the option is added to the acquisition cost of the shares. TCGA92/S114, see CG51626, now has effect only for the purposes of Corporation Tax and provides that in calculating the indexed pool of expenditure the amount paid for the option is indexed from the date the option was acquired. For further guidance on indexation allowance see CG17700+.
Option sold
The sale is a disposal to which the ordinary capital gains rules apply. The option is not treated as a wasting asset and therefore the acquisition cost is not reduced, TCGA92/S146, see CG55416. Indexation allowance, if due, is given from the date the option was acquired, see CG12315.
Option abandoned or lapses
There is a disposal of the option at the time it is abandoned or expires, see CG55415. The option is not treated as a wasting asset and therefore the acquisition cost is not reduced, TCGA92/S146, see CG55416. A loss thus accrues equal to the cost of acquiring the option.