Share Incentive Plan (SIP)

By Tolley in association with Grant Thornton

The following Owner-Managed Businesses guidance note by Tolley in association with Grant Thornton provides comprehensive and up to date tax information covering:

  • Share Incentive Plan (SIP)
  • Summary
  • Key considerations
  • Tax treatment and reporting requirements


The SIP is a tax advantaged HMRC employee incentive plan (known as an ‘approved’ employee incentive plan prior to April 2014) which provides employees with the opportunity to obtain a continuing stake in their employing company through the acquisition of shares. Provided that qualifying conditions are met, the SIP provides for tax and NIC advantages for participants.

HMRC guidance can be found at ETASSUM10000 onwards. See the Share incentive plans ― an overview guidance note in the Employment Taxes module (subscription sensitive).

Key considerations
General requirements

The rules for SIPs are found at ITEPA 2003, Sch 2 and Part 7, Chapter 6.

The general requirements of the plan are outlined in ITEPA 2003, Sch 2, paras 8–12. The plan must be open to all UK resident employees, although a qualifying period of up to 18 months can be imposed. The terms must be the same for every employee who wishes to participate, and no preferential treatment can be given for directors or senior employees.

The SIP must be operated via a UK resident trust which holds shares on behalf of employees.

Eligible employees

As provided in ITEPA 2003, Sch 2, para 8, all eligible employees must be able to participate in the award, and must be invited to do so.

An employee is regarded as an eligible employee if:

  • he is an employee of the company or a constituent company
  • he has been employed by the company for the whole of the qualifying period (if one has been imposed)
  • he does not have a material interest (defined in ITEPA 2003, Sch 2, paras 20–21) in the company, and
  • he does not participate in

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