CG56387 - Employment-related securities: securities options: employee: replacement option
TCGA92/S237A
A replacement option may be granted over the shares in the same or a different company. This may happen for a number of reasons, one of which is that the company that granted the option is taken over by another company. If so, the old option may be released in consideration of the grant of a replacement option.
Chapter 5 Part 7 ITEPA03 does not impose an Income Tax charge where an employee releases an employment-related option and the consideration for the release is a replacement option.
No chargeable gain accrues to an employee on the release of his or her old share option as TCGA92/S237A provides that the acquisition of the new option is not to be regarded as consideration for the release of the old.
Furthermore, the acquisition cost of the new option will be the same as that of the released option together with any additional consideration paid for the new option.