The following Tax Q&A produced in partnership with Sean Randall of Blick Rothenberg provides comprehensive and up to date legal information covering:
To set the scene, if the exercise of an option is linked to the grant of the option, the amount of SDLT payable is determined by reference to the amount paid (if any) for the grant and the exercise before being pro-rated between the two transactions, see Practice Note: SDLT—options and rights of pre-emption. This will usually increase the amount of tax payable overall and may cause the purchaser to re-notify HMRC and pay additional tax in respect of the grant of the option.
Transactions are ‘linked’ if they form part of a single scheme, arrangement or series of transactions between the same vendor and purchaser or persons connected with them.
The test of connection in section 1122 of the Corporation Tax Act 2010 is used for this purpose. The purpose of the provision is to prevent parties to a transaction artificially splitting up one transaction into a number of smaller ones in order to take advantage of the lower rates of tax.
The application of the concept to options is unclear. Within the definition, there are two tests to meet before the exercise of an option can be linked to
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