Types of SIP awards
Produced in partnership with Jonathan Fletcher Rogers of Addleshaw Goddard
Types of SIP awards

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:

  • Types of SIP awards
  • Partnership shares
  • What are partnership shares?
  • What is salary?
  • Partnership share agreement
  • Limits on deductions from salary
  • Deductions in excess of limits
  • Limit on number of partnership shares
  • Minimum deductions from salary
  • Partnership shares—forfeiture
  • More...

Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) uses the phrase an ‘award of shares’ to identify 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.

A company which establishes a share incentive plan (SIP) which provides for the acquisition of partnership shares is under no obligation to offer free shares and vice versa.

A SIP may impose a qualifying period of employment which must be the same for all participants in the plan. The maximum qualifying period varies depending on the type of award and whether there is an accumulation period. For further details, see Practice Note: SIPs—who can be granted an award?

This Practice Note looks at the four different types of award under a SIP, those being: partnership shares, free shares, matching shares and dividend shares.

  1. partnership shares

  2. matching shares

  3. free shares, and

  4. dividend shares

This Practice Note also then looks at the make-up of a typical SIP—see: Typical operation of a SIP.

Partnership shares

What are partnership shares?

Partnership shares are shares acquired on behalf of employees out of sums deducted from their salary, and must be awarded to all participating employees on the same

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