Share Incentive Plan (SIP) ― qualifying conditions for employees

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Employment Tax

Guidance

As the share incentive plan (SIP) is designed to be an all-employee plan, the employee qualifying conditions are not particularly onerous ― the qualifying conditions for the company operating the SIP and the parameters for the design of the plan itself are much stricter. ITEPA 2003, Sch 2, paras 13 to 18A (Part 3) establishes the eligibility of individual employees to receive SIP awards.

All-employee plan

With some specific exceptions, all employees must be offered SIP awards on the same terms. The main exception is that the number of free shares offered to each employee can be calculated by reference to existing remuneration, length of service and/or hours worked. Senior employees or directors cannot have priority to SIP awards.

No loans

No loans can be made to employees to facilitate SIP awards.

Eligibility at the appropriate time

Before any SIP award is made, an employee must be eligible to receive that SIP award at a specified time, called the ‘appropriate time’. Table 1 sets

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Helen Wood

Founder, HLN WD TX , Employment Tax

Helen Wood is the founder of HLN WD TX, a share schemes and employee incentives advisory business.She qualified as a CA with ICAS in 2009 and has worked as a specialist reward and incentives advisor for 17 years, spending 13 of those at KPMG followed by 3 ½ years as an Associate Director at RSM. Helen has worked with businesses ranging from start-ups to fully listed companies, spanning owner-managed businesses, private equity portfolio companies, and AIM listed businesses.She advises on a wide range of employee share schemes and employment related securities matters including the design and implementation of effective management and employee incentives; tax valuation of employment related securities, buy and sell side transaction support, HMRC compliance, tax due diligence and employee ownership trust transactions.

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