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Where an employment-related securities option is assigned, released or exercised, the charge is to income tax rather than capital gains tax; for more details see E4.508H. There may, though, be capital gains tax implications if an employment-related securities option is assigned to an 'associated person' (see E4.508H). This is not a chargeable event for income tax purposes; however, on a subsequent chargeable event there is no statutory relief for any capital gains tax that may already have been suffered.

The amount counting as employment income on the exercise of a right to acquire shares (the 'taxable amount' for income tax purposes) is added to the consideration for the acquisition of the shares in calculating any capital gain or loss on their subsequent disposal¹. Certain amounts deducted in arriving at the taxable amount are added back for this purpose²;for more details see E4.508L.

Example 1

AB acquired 1,000 shares in CD Ltd on 1 January 2021 by reason of the exercise of a right under an employee share scheme. AB acquired