An introduction to tax-advantaged Share Incentive Plans for corporate lawyers
Produced in partnership with Dilpa Raval of CMS and Graham Muir of CMS
An introduction to tax-advantaged Share Incentive Plans for corporate lawyers

The following Corporate practice note Produced in partnership with Dilpa Raval of CMS and Graham Muir of CMS provides comprehensive and up to date legal information covering:

  • An introduction to tax-advantaged Share Incentive Plans for corporate lawyers
  • SIP awards
  • Partnership shares
  • Matching shares
  • Free shares
  • Dividend shares
  • Conditions: the employee
  • Conditions: the shares
  • The role of the SIP Trustee
  • Self-certification of SIPs
  • More...

This Practice Note describes:

  1. the awards available to employees under a Share Incentive Plan (SIP)

  2. the statutory conditions which a SIP must satisfy, and

  3. the tax benefits of SIP awards

A SIP is a tax-advantaged share plan that is intended to provide employees of both listed and unlisted companies with an opportunity to acquire shares (in contrast to options over shares) in their employer (or its parent). The shares acquired are held beneficially for employees by the trustee of a UK resident trust (SIP Trustee).

A SIP must satisfy the conditions set out in Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) in order to qualify for the relevant tax advantages.

A company can set up a SIP solely for its own employees or, if it controls other companies, extend the plan to employees of one or more of those companies (a group plan). A SIP must be operated on an all-employee, not discretionary, basis and all eligible employees must be invited to participate on the same terms.

A SIP that has satisfied the statutory conditions provides a number of significant tax reliefs for employees.

Prior to 6 April 2014, a SIP needed to be approved in advance by HM Revenue & Customs (HMRC) in order to qualify for tax-advantaged treatment, and hence was known as an HMRC approved (or just approved) SIP. However,

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