Section 667 | Shares acquired on exercise of non-embedded option

(1)This section applies if—

(a)a company is a party to a derivative contract in an accounting period,

(b)the derivative contract is a plain vanilla contract,

(c)the contract is an option,

(d)rights to acquire shares are comprised in the contract, and

(e)shares are acquired as a result of the exercise of any of those rights in the accounting period.

(2)For the purpose of calculating any chargeable gain accruing to the company on a disposal by it of all the shares so acquired, the sums allowable as a deduction under section 38(1)(a) of TCGA 1992 (acquisition costs) are—

(a)if G exceeds L, increased by the amount of that excess,

(b)if L exceeds G, reduced by the amount of that excess,

and, in the case of a part disposal of those shares, section 42(2) of that Act (part disposals) has effect accordingly.

(3)If the amount of the excess in subsection (2)(b) is greater than the amount of expenditure allowable under section 38(1)(a) of TCGA 1992, the amount of the excess which cannot be deducted from the expenditure so allowable is, for the purpose mentioned in subsection (2), added to the amount of the consideration for the disposal of the shares.

(4)For the meaning of G and L, see section 669.