½Û×ÓÊÓƵ

The grant of an option is a disposal of an asset (see C2.1001). When the option is exercised the rules described in C2.1007 and C2.1008 provide that the grant of the option and the transfer of the underlying asset are treated as a single transaction. In this single transaction the disposal proceeds or acquisition costs of the option are taken into account when determining the disposal proceeds and acquisition costs of the underlying asset. The market value rule (see C2.109), if appropriate, applies to the amount taken into account for the grant or acquisition of the option. However the amount payable when the option is exercised is the actual amount paid or received under the terms of the option¹.

The market value rule would apply to the grant of the option if it was granted:

1. Ìý

   •ÌýÌýÌýÌý otherwise than by way of a bargain made at arm's length (including to a connected person)

2. Ìý

   •ÌýÌýÌýÌý for consideration that cannot be valued, or

3. Ìý

   •ÌýÌýÌýÌý in return for services