CGT on traded options (close out)

If I sold a traded option on 01 April 2024 for GBP 100 and then bought back that option for GBP 500 on 20 April 2024 then I am looking at CG55545 and TCGA92/S148 for the appropriate treatment. Is it correct to say that the appropriate treatment would be an allowable loss as of 01 April 2024 (and therefore should be entered as such of a 23/24 self assessment tax return) since as per CG55545 "The cost of buying the purchased option plus any incidental expenses is treated as an allowable cost of granting the first option. The gain on the grant of the first option will thus be reduced." I have also looked at the legislation and Section 148 reads as follows: 148Traded options: closing purchases (1)This section applies where a person (“the grantor”) who has granted a traded option (“the original option”) closes it out by acquiring a traded option of the same description (“the second option”). (2)Any disposal by the grantor involved in closing out the original option shall be disregarded for the purposes of capital gains tax or, as the case may be, corporation tax on chargeable gains. (3)The incidental costs to the grantor of making the disposal constituted by the grant of the original option shall be treated for the purposes of the computation of the gain as increased by an amount equal to the aggregate of— (a)the amount or value of the consideration, in money or money’s worth, given by him or on his behalf wholly and exclusively for the acquisition of the second option, and (b)the incidental costs to him of that acquisition. (4)In this section “traded option” has the meaning given by section 144(8). Again (and unsurprisingly since CG55545 is guidance to the legislation!) paragraph 3 reads as saying that the cost of the closeout option added to the incidental costs incurred in granting the intial option. So it seems clear that the two transactions are treated as one and also it appears that they are all deemed to occur on the date of the initial grant. Can I confirm this is the correct interpretation?

Hi,

You are correct. The £500 is an allowable cost of granting the first option and any gain on the grant would be reduced by it and any incidental expenses. 

Thank you.