In Lars Sjumarken v HMRC [2016] UKUT 0568 the Upper Tribunal (UT) held that the value of lost share options could not be used to reduce taxable income on termination of employment.

  • The taxpayer worked for BNP Paribas until his contract was terminated in 2005.
  • On termination he received cash payments and a release of shares under the company’s Share Incentive Plan (SIP).
  • Whilst an employee he had received long dated share options which he lost on termination.
  • He claimed that the value of these forfeited options should be set against the taxable cash and SIP shares received so that he was only taxable on the net amount.

The First Tier Tribunal (FTT) had previously rejected the taxpayer’s appeal, concluding that the taxpayer was not entitled to reduce his taxable income on termination to take into account the value of the options lost. 

The Upper Tribunal has now upheld that decision, but for different reasons:

  • The legislation on termination payments does not contemplate a deduction from cash payments.
  • Cases on negative earnings were not helpful: there was no contingent amount requiring repayment.
  • The cash amounts received had not been netted down by reference to the value of the options.
  • Although a release of options can amount to consideration given for shares, there was no agreement between the parties that the options would be forfeited in return for releasing the SIP shares.

The taxpayer’s appeal was therefore dismissed.


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Case reference:  Lars Sjumarken v HMRC [2016] UKUT 0568