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Payment following termination of share options did not attract relief on the first £30,000

By Mark McLaughlin, November 2023

A payment received by the taxpayer shortly after his employer was the subject of a merger was taxable in full as a payment in connection with the loss of his share options, and not in respect of the loss of his employment rights so attracting relief on the first £30,000 paid to him. 

The appellant was employed by a UK company (B). In June 2006 and May 2007, the appellant was granted options over shares in B’s parent company (BC), as part of the B 1998 stock option scheme made available to employees. In May 2015, a takeover of BC was announced. On 29 May 2015, the appellant asked B whether the merger would result in the cancellation of share options. B confirmed to the appellant that all stock options would be cancelled for a cash payment. 

On 1 February 2016, the merger was effective. On 22 April 2016, the appellant submitted a voluntary tax return for 2015/16, reporting the payment as taxable income. However, on 20 August 2016,

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