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In 2006, the taxpayer granted N share options as part of an equity raising exercise. These were in effect payment for advisory services instead of a fee. In 2007, the taxpayer was in financial difficulty so the 2006 option agreements were novated and new, less valuable, options issued to N who was appointed its chairman.
The issue was whether the 2007 option was an employment-related securities option within ITEPA 2003, s 471 – as contended by HMRC.
The First-tier Tribunal allowed the taxpayer’s appeal.
The Upper Tribunal decided the opportunity to acquire the 2007 share option was available by reason of employment and therefore s 471(1) was satisfied. The option had been granted to N to replace the previous one but was also as part of a rescue package which included N’s employment. The 2007 share option was an employment-related securities option.
HMRC’s appeal was allowed.
