Common pitfalls and practical issues with SIPs

Produced by Tolley in association with

Employment Tax

Guidance

Most employee share plans (including Share Incentive Plans (SIPs)) are well designed and implemented. However, there are some things which can trip up even the most well-meaning of employers.

This list covers some problems that companies, scheme administrators and advisers may encounter.

Failing to provide a market for employee shares

Where a listed company operates a SIP, there is a readily available market for the employees’ shares at the end of the holding period. However, where a private company or a company listed on a junior market with less liquidity operates a SIP, significant thought must be given to how employees will realise cash or otherwise benefit from their SIP awards.

There are a number of possible ways to deal with this, in common with other employee share schemes operated by private companies. Some examples include:

•
allow the sale of shares only on an exit event or when leaving the company
•
create a market by funding the SIP trust to buy back and recycle shares for future

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Helen Wood

, Employment Tax

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