Section 173 — Corporation Tax Act 2010: Cases in which option arrangements are in place

Cases in which option arrangements are in place 173 1 Section 174 applies if option arrangements are in place at the relevant time. 2 “ Option arrangements ” means arrangements in relation to which conditions A and B are met (but see sections 174A and 174B) .

3 Condition A is that the effect of the arrangements is that there could be a change in—

a the proportion of profits to which any of the participating equity holders would be beneficially entitled on the profit distribution if it were made at a time after the relevant time, or b the proportion of assets to which any of the participating equity holders would be beneficially entitled on the notional winding up if it occurred at a time after the relevant time.

4 Condition B is that, under the arrangements, the change could result from the exercise of—

a a right to acquire ordinary shares in company B (see section 160) or securities in company B, or b a right to require a person to acquire such shares or securities.

5 For the purposes of subsection (4)—

a it does not matter whether or not the shares or securities were issued before the arrangements were put in place, b “ right ” does not include a right within subsection (6),

and c “ securities ” does not include normal commercial loans (as defined by section 162).

6 A right is within this subsection if it—

a is a right of an individual to acquire shares, b was obtained because of the individual's office or employment as a director or employee of company B, and c was obtained in accordance with a share option scheme at a time when the scheme was an approved share option scheme.

7 In subsection (6)(c)— “ share option scheme ” means—

an SAYE option scheme within the meaning of the SAYE code (see section 516(4) of ITEPA 2003), or a CSOP scheme within the meaning of the CSOP code (see section 521(4) of ITEPA 2003), and “ approved ” means—

in relation to an SAYE option scheme, approved under Schedule 3 to ITEPA 2003, and in relation to a CSOP scheme, approved under Schedule 4 to ITEPA 2003.