Share incentive plans ― an overview

By Tolley
Share incentive plans ― an overview

The following Employment Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Share incentive plans ― an overview
  • Introduction
  • Legislation
  • SIP trusts
  • Notifying HMRC
  • HMRC powers and penalties
  • Annual reporting
  • Eligibility
  • Similar terms
  • Scheme shares
  • Prohibited companies
  • Types of share
  • Holding period
  • Forfeiture
  • Disqualifying events
  • Withdrawal of shares
  • Tax treatment
  • Overall summary


Due to the coronavirus (COVID-19) outbreak, there may be some issues or changes requested from employees to tax-advantaged share schemes. To bring all the relevant tax issues together in one easily accessible place, we have a dedicated Tolley COVID-19 Toolkit .

Share Incentive Plans (SIPs), originally known as ‘All Employee Share Ownership Plans’, were introduced at the same time as EMI. Since their introduction, the underlying rules and conditions have remained broadly the same, although in recent years various recommendations made by the Office of Tax Simplification (OTS) have led to the removal of some unnecessary anomalies between SIPs and other tax-advantaged share schemes. Also, an SIP was originally one of the three types of tax-advantaged share scheme that required HMRC approval (the others being CSOPs and SAYE option schemes). From 2014/15 onwards the requirement for HMRC approval has been replaced with a system of self-certification. Existing approved schemes had to re-register with HMRC and self-certify to retain the tax advantages of the SIP uninterrupted.

Due to the need to use a separate trust, the relative complexity of the arrangements and administration, as well as the requirement broadly to offer similar share rights to all employees, SIPs have almost exclusively been utilised by large, publicly quoted companies.


The SIP legislation is contained in ITEPA 2003, ss 488515 and Sch 2. Further provisions are included in ITTOIA 2005, ss 382, 384385, 392396, 402408 and 770.

HMRC has a section of its Employee Tax Advantaged Share Schemes User Manual dedicated to the subject which can be found at ETASSUM20000 onwards.

SIP trusts

The trust must be constituted under UK law and all trustees must be resident