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Autumn 2003 Newsletter

Options and losses

Anyone who paid income tax on exercising employee share options over the last few years should know about the case of Mansworth v Jelley. The decision led the Revenue to announce in January this year that capital gains on those option-bought shares should have been much smaller, and in most cases should have been losses. So everyone in this position should now be claiming for losses that they did not realise they had made. In many cases, large refunds of tax are following.

Earlier this year, the Revenue said that you could not change a figure that you had originally put on the tax return, because it had been believed to be correct according to everyone's understanding of the rules at the time. So, if you reported a gain, you were stuck with it - but you could now claim a loss as well, if the case turned your gain into a loss; but if you reported a small loss, you were stuck with that too - you could not increase the amount of the loss.

The Revenue have now accepted that this second point is wrong. If you claimed a small loss, you can make an additional claim for the rest. The full effects of the case will probably have to be sorted out in court, but this is a small amount of progress for those who are arguing with the Revenue.

If you have ever paid income tax on employee options, and have not yet discussed this issue with us, we will be happy to advise you.

The change of view on increasing losses was entered on the Revenue website "Q&A" on Mansworth v Jelley on 8 August.