Unapproved share option schemes

Overview

A share option is a right that your employer grants you to acquire shares in the company.

The shares may be at no cost to you (nil option) or at a pre-determined price your employer sets (the option price). Under a share option scheme your employer will predetermine the:

  • number of shares you can acquire
  • option price (if any)
  • exercise period (the dates from which and by which you may exercise your option).

Taxation

You must pay on any gain you make on the exercise, assignment or release of a share option:

How you are taxed depends on the type of share option. There are two types of share options:

  • a short option, which must be exercised within seven years from the date it is granted
  • a long option, which can be exercised more than seven years from the date it is granted.

Option to exercise

You can choose whether or not you wish to exercise an option to acquire shares. You may decide to let an option lapse if, for example, the option price agreed is higher than the market value of the shares.

This section explains the taxation of rights to acquire shares through unapproved share option schemes. This differs to a Revenue approved Save As You Earn (SAYE) scheme or the Key Employee Engagement Programme (KEEP).

Note

You are considered a 'chargeable person' for the year in which you exercise, assign, or release a share option. You must file an Income Tax Return (Form 11) for that year under self-assessment.

If you sell your shares (that you acquired by exercising an option) then you must also report details of this on your tax return.

Next: Taxation of a short option