If an option is exercised, the grant of the option and the transaction entered into by the person granting the option (the 'grantor'), in fulfilment of their obligations under the option, are treated as a single transaction1.
Option requiring the grantor to sell (a 'call' option)
A call option binds the grantor to sell an asset, ie the single transaction is a sale to the person exercising the option (the 'grantee'); the consideration received for grant of the option is treated as part of the consideration for the sale2 along with the consideration received for the transfer of the asset. The tax arising on the original grant of the option (see C2.1001) is either set-off or repaid3.
Example 1
AB granted an option to CD in May 2020 for £5,000, under which CD could purchase land owned by AB for £50,000 within 2 years of the grant of the option. In
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