IHTM10352 - Share options: pure share option schemes
The employee is granted an option to buy a specified number of shares at a fixed price when the option is granted. The employee pays nothing until the rights are exercised within the option period, usually 3-7 years after the option is granted.
You can usually accept that the difference between the date of death value and the cost of the option is the market value of the option at the date of death. If the difference is a negative amount, limit the open market value to nil.
If the value offered is less than the difference, and the amount of tax involved is substantial, seek advice from Shares and Assets Valuation.
If the taxpayer disagrees with our approach to these schemes, seek advice from Technical.