CSOP—CGT treatment and corporation tax treatment
CSOP—CGT treatment and corporation tax treatment

The following Share Incentives practice note provides comprehensive and up to date legal information covering:

  • CSOP—CGT treatment and corporation tax treatment
  • Capital gains tax—basic principles
  • Capital gains tax on the grant of CSOP options
  • Capital gains tax on the exercise of CSOP options and sale of shares
  • CGT treatment of option holder
  • CGT treatment of grantor
  • Surrender of a CSOP option
  • Business asset disposal relief (previously entrepreneurs’ relief)
  • Annual exemption and spouse transfers
  • CSOP options and corporation tax relief for companies

FORTHCOMING CHANGE: On 14 July 2020, the Office of Tax Simplification announced that it is conducting a review of capital gains tax (CGT), seeking both high-level comments on the principles of CGT, and more detailed comments on the technical detail and practical operation of CGT. See News Analysis: OTS review of capital gains tax—background, scope and next steps. On 11 November 2020, the OTS published a report setting out a framework within which the government could consider simplifying the design of CGT. See News Analysis: OTS Capital Gains Tax Review: Simplifying by design.

Capital gains tax—basic principles

When a person disposes of an asset and makes a profit that is capital in nature, this has the potential to be a taxable capital gain. When deciding whether a charge to tax arises, there are a number of issues to consider:

  1. the asset, the disposal, and the person making the disposal must all be of a type that can attract capital gains tax (CGT)

  2. the ‘consideration minus costs’ must result in a gain:

    1. for further details on how to calculate the gain, see Practice Note: How is a capital gain calculated?

  3. an exemption or relief may apply:

    1. some assets, and some persons, are entirely exempt from CGT (see Practice Note: What is a capital gain?)

    2. individuals are exempt from CGT to the extent that their gains in a

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