Unapproved share option schemes
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).
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.
Unapproved share options – What you need to do
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 the taxation of:
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 receive dividends as a result of your shareholding, you must also declare this income.
If you sell your shares (that you acquired by exercising an option), then you must also report details of this disposal on your tax return. You must report this disposal to Revenue, even if no tax is due.
Next: Taxation of a short option