What is the tax treatment of a CSOP?

There is no income tax or NICs charge when CSOP options are granted.

Options can be exercised free of income tax and NICs provided the exercise takes place three years or more after grant.  If shares are subsequently sold at a later date any increase in value falls under the Capital Gains Tax regime.  Business Asset Disposal Relief may be available where the holding exceeds 5% of the company’s share capital, subject to certain requirements.

CSOP options can sometimes also be exercised tax-efficiently within three years — for example where the participant is a “good leaver”, or where the company is bought or taken over.