When an option is exercised, or there is another chargeable event (see ERSM110500), the taxable amount counts as employment income of the employee for the relevant tax year.

The ‘relevant tax year’ is the year in which the chargeable event occurs (ITEPA03/S476).

The taxable amount arising when a chargeable event occurs is:


where AG is the amount of the gain and DA is the deductible amounts (ITEPA03/S478).

Amount of gain – AG – on acquisition of securities

The amount of the gain (AG) on the acquisition of securities pursuant to an employment-related securities option is

MV – C where

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