No exchange

Did cancelled options reduce taxable receipts?

The taxpayer worked as an investment banker at BNP until his employment was terminated in January 2006. Under a compromise agreement he received a cash termination payment and the release of shares under a share incentive plan (SIP) and cash under a cash incentive plan (CIP). While he was an employee he had been granted 3 000 long-dated share options but he had lost his entitlement to those on termination of his employment.

The taxpayer considered that he had forfeited the options under the compromise agreement and therefore they should be treated as reducing his taxable income. But HMRC said the taxpayer had no options to give up when the compromise agreement was made because they lapsed automatically on termination of employment.

The First-tier Tribunal dismissed the taxpayer’s appeal.

The Upper Tribunal accepted the taxpayer’s contention that the options were given up...