SIPs—who can be granted an award?
Produced in partnership with Jonathan Fletcher Rogers of Addleshaw Goddard

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

  • SIPs—who can be granted an award?
  • Terminology
  • Participation by non-UK residents
  • Employees under notice
  • Prohibition on discouraging features
  • Same terms requirement
  • No preferential treatment for directors and higher paid employees
  • Eligibility of individuals
  • Timing of eligibility
  • Employment requirement
  • More...

SIPs—who can be granted an award?

Terminology

Schedule 2 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) uses the phrase an ‘award of shares’ to indicate shares that are either appropriated to employees or acquired on behalf of employees on a particular occasion. Therefore, where numerous employees are awarded shares at the same time pursuant to the same invitation, each employee is considered to have participated in the same award of shares.

All-employee nature of the SIP

It is a key principle of a share incentive plan (SIP) that it must be operated on an all-employee basis. This means that all UK resident taxpayers who are employed by:

  1. the company that established the SIP, or

  2. any other group company (controlled by the company that established the SIP) to which the SIP is extended

and who otherwise meet the eligibility requirements (see below) must be invited to participate in an award of shares.

A UK resident taxpayer is one whose earnings from the employment by virtue of which the individual is eligible to participate in the SIP are general earnings for a year in which the individual is UK resident (within ITEPA 2003, s 15).

No conditions apart from those required or authorised by ITEPA 2003, Sch 2 may be imposed on an employee’s participation in an award of shares under the SIP.

Participation by non-UK residents

It is

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