SIPs valuations
Produced in partnership with Jonathan Fletcher Rogers of Addleshaw Goddard
SIPs valuations

The following Share Incentives guidance note Produced in partnership with Jonathan Fletcher Rogers of Addleshaw Goddard provides comprehensive and up to date legal information covering:

  • SIPs valuations
  • Why do you need a valuation for SIP purposes?
  • Definition of market value
  • Restrictions
  • Date on which market value is determined
  • Award of partnership shares
  • Award of matching shares
  • Award of free shares
  • Acquisition of dividend shares
  • Valuations for income tax purposes
  • more

Why do you need a valuation for SIP purposes?

There are a number of different circumstances in which it will be necessary to value the shares subject to a share incentive plan (SIP) award. Shares will need to be valued at the time an award is made and may also need to be valued when they cease to be subject to a SIP.

Valuations are necessary to:

  1. calculate the number of shares to be awarded

  2. ensure that the relevant statutory limits are complied with, and

  3. calculate any income tax liability

For companies operating SIPs using partnership shares, it may be necessary to value the shares on a monthly basis.

This Practice Note:

  1. analyses the definition of market value used by the SIP code

  2. considers all of the different circumstances where a valuation may be required, and

  3. outlines the relevant statutory rules

For further information on SIPs more generally, see Practice Note: What is a SIP?

Definition of market value

For the purposes of the SIP code (which includes sections 488–515 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) and ITEPA 2003, Sch 2, Pts 1–11), the market value of shares has the same meaning given to it in section 272 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992), which is:

  1. the price those shares might reasonably be