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I work for a US company in their UK office (I'm a UK national). 2 months ago, the company offered me a grant of non-qualified stock options, which expire in 10 years. However the system tells me I have a further month to decide whether to accept or reject the "terms of the grant agreement". I've been trying to figure out what this means, but I'm coming up short.

My situation certainly isn't unique, but after looking around other questions and the internet at large, I'm still non-the-wiser. I suspect my questions are too beginner-level for most resources to bother explaining.

My questions are:

  • If I accept this grant option, does anything happen? (Does "accepting" mean the same as "exercising", or is it just me saying "yeah that agreement looks OK to me"?)
  • Do I need to pay anything / will I become liable for some US or UK tax when I accept it?
  • Does the price of the company's stock on the day that I accept it matter?
  • Would I be risking anything? (could I still walk away if the company's value went down?)
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An option is not an obligation, if you accept the options and never exercise it, then, as you mentioned above, it will expire in 10 years. In your case, accepting is not exercising, so there is no problem. Taxes will come into play if you make any capital gain (depending on the tax laws), which you would make if you exercise the options above the strike price of the options i.e. if the share price goes above the strike price. My guess would be you are being offered options for a specific strike price, so the share price on the day of acceptance should not matter (however, do check if there is any clause regarding that). Taking an option does not risk anything, as I mentioned it is option not an obligation.

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  • This isn't quite right. In the UK, unapproved (which I assume is what is meant by non-qualified) options are liable for income tax, not capital gains tax, upon exercise. That will generally mean a higher tax bill. However, it's true that there's no tax liability arising from the grant of an unapproved option.
    – Mike Scott
    Commented Jul 6, 2016 at 12:03

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