SIP—basic principles

A share incentive plan (SIP) gives employees the opportunity to acquire shares in their employer or a parent company of the employer on a tax-efficient basis.

As SIPs are designed to be offered to all employees (rather than on a selective basis), they tend to be operated by larger listed companies.

If the statutory provisions are met and the SIP is correctly notified to HMRC, favourable tax treatment can result.

This subtopic introduces the concept of a SIP and examines when SIPs may be the appropriate choice for a company.

Introduction to SIPs

The majority of the legislation which governs SIPs can be found in:

•
sections 488–515 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) (Chapter 6 of Part 7), and
•
ITEPA 2003, Sch 2 Pt 1–Sch 2 Pt 11

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