§ Next I come to share options granted by companies to their directors or executives.
§ When a director or employee exercises a share option he is getting something which is worth more than he pays for it, and the difference in value is remuneration which ought to pay Income Tax and Surtax. However, the courts have decided that the liability to tax arose when the option was granted, not when it is exercised, and as a result very little tax can be charged in practice. Hence no doubt the growing popularity of options; and hence my proposal to put their taxation on a proper footing for the future.
§ I propose that Income Tax and Surtax shall be charged in respect of all options exercised on or after today, irrespective of the date when the option was granted, The charge will be on the difference between the value of the shares at the date the option is exercised and the amount paid for them; but in the case of options granted before today, any increase in the value of the shares which took place before today will be left out of account.