ERSM20185 - Employment-related securities and options: options and futures: options
There is no statutory definition of options in ITEPA 2003. It includes the right, obtained for payment or under seal, to buy or sell specified assets at a specified price within a specified time. Generally, an option is a right which is contractually enforceable on its own terms. Many options we see are granted under overseas plans. In such cases what makes an option contractually enforceable on its own terms is determined under the law of the relevant overseas jurisdiction. If you are in doubt whether what is styled an option is contractually enforceable on its own terms, contact ESSU (ERSM10040).
鈥楽ecurities option鈥� has a specific statutory meaning per ITEPA03/S420 (8) - 鈥渢he right to acquire securities鈥�. See ERSM110000 et seq.
Call options
A call option is a right to buy something. The vast majority of securities options granted to employees are of this type. Call options over securities (providing they are not used in avoidance on or after 2 December 2004) are excluded from being 鈥渟ecurities鈥� by ITEPA03/S420 (5)(e) - see ERSM20200.
Put options
In some circumstances individuals are given the right to sell shares that they currently own. Such rights are often referred to as 鈥榩ut鈥� options. A put option is not a 鈥榮ecurities option鈥� within the meaning of ITEPA03/S420 (8), since it does not give the holder the right to acquire securities, but to sell them. Put options do not generally give rise to income tax charges under Part 7, either because they have no intrinsic value or they form part of the rights attaching to the shares themselves