Share incentive plans ― an overview

Produced by Tolley in association with

Employment Tax

Guidance

Introduction

Share incentive plans (SIPs) were originally known as ‘All Employee Share Ownership Plans’ and were first introduced over 20 years ago. They are one of four tax-advantaged employee share schemes currently available in the UK. Under a SIP, employees can buy shares in their employing company from their gross salary whilst the employer can also provide them with matching shares at no extra cost to the employee. The shares are held in a separate SIP trust whilst they reside in the SIP plan. The legislation governing SIPs is found in ITEPA 2003 Schedule 2, and HMRC often refer to this type of plan as a Schedule 2 SIP.

When all relevant conditions are satisfied, no liabilities to income tax or national insurance contributions (NIC) arise on shares being awarded to employees or withdrawn from the SIP. Qualifying Schedule 2 SIPs must be open to all eligible employees. See Simon’s Taxes E4.528.

Employers must self-certify that all the SIP legislation is met by the plan following the end of the tax

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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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