The following Share Incentives practice note Produced in partnership with Jeremy Edwards of Baker McKenzie provides comprehensive and up to date legal information covering:
The most common type of awards that can be made under a long-term incentive plan (LTIP) include:
conditional share awards (which are sometimes known as restricted stock units (RSUs))
forfeitable shares, which are sometimes described as restricted stock, and
Share appreciation rights (SARs)
The standard LTIP now contains both a vesting period of typically three years and a further retention period of two years and this Practice Note addresses the tax implications for LTIP awards with holding periods.
For more information on each type of award, see Practice Note: Structure of a long-term incentive plan—Types of awards.
This Practice Note seeks to examine the tax treatment of:
conditional share awards (RSUs)
forfeitable shares, and
It also examines:
restricted share issues
dividend and dividend equivalents
NICs and PAYE obligations
death of the employee
other tax consequences, and
impact of non-UK residence
How a conditional share award (or RSU) is taxed will depend upon whether or not it is a ‘securities option’ for the purposes of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003).
In practice, for most employees resident in the UK, there will be no difference in the effective tax treatment of the conditional share award regardless of whether or not the award is a securities option. However, the distinction is still relevant for
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