Income Tax (Earnings and Pensions) Act 2003

Part 1 U.K. Introduction

[F1 Introduction to Schedule 2] share incentive plans (SIPs) U.K.

Textual Amendments

F1 Words in Sch. 2 para. 1 cross-heading substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 15, 89 (with Sch. 8 paras. 90-96)

1 [F2 (A1) For the purposes of the SIP code a share incentive plan (a “SIP”) is a Schedule 2 SIP if the requirements of Parts 2 to 9 of this Schedule are met in relation to the SIP.] U.K.

(3) The requirements consist of general requirements (see Part 2) and requirements as to—

• the eligibility of individuals (see Part 3),

• the types of shares that may be awarded (see Part 4),

• free shares (see Part 5),

• partnership shares (see Part 6),

• matching shares (see Part 7),

• cash dividends and dividend shares (see Part 8), and

• the trustees (see Part 9).

[F3 (4) Sub-paragraph (A1) is subject to Part 10 of this Schedule which—

(a) requires notice of a plan to be given to Her Majesty's Revenue and Customs (“HMRC”) in order for the plan to be a Schedule 2 SIP (see paragraph 81A(1)),

(b) provides for a plan in relation to which such notice is given to be a Schedule 2 SIP (see paragraph 81A(4)), and

(c) gives power to HMRC to enquire into a plan and to decide that the plan should not be a Schedule 2 SIP (see paragraphs 81F to 81I).]

[F4 (5) Sub-paragraph (A1) is also subject to Part 10A of this Schedule (disqualifying events).]

Textual Amendments

F2 Sch. 2 para. 1(A1) substituted for Sch. 2 para. 1(1)(2) (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 16(2), 89 (with Sch. 8 paras. 90-96)

F3 Sch. 2 para. 1(4) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 16(3), 89 (with Sch. 8 paras. 90-96)

F4 Sch. 2 para. 1(5) inserted (with effect in accordance with Sch. 3 para. 2(4) of the amending Act) by Finance Act 2016 (c. 24), Sch. 3 para. 2(2)

SIPs: free shares and partnership shares U.K.

2 (1) In the SIP code a “share incentive plan” (or “SIP” for short) means (in accordance with section 488(4)) a plan established by a company providing— U.K.

(a) for shares to be appropriated to employees without payment (“free shares”), or

(b) for shares to be acquired on behalf of employees out of sums deducted from their salary (“partnership shares”).

(2) In the SIP code, in relation to a SIP—

• “the company” means the company which established the plan;

• “plan requirements” means requirements applying to the plan;

• “the trustees” means the body of persons established under Part 9 to exercise functions in connection with the plan.

Matching shares U.K.

3 (1) A SIP that provides for partnership shares may also provide for shares to be appropriated without payment to employees in proportion to the partnership shares acquired by them (“matching shares”). U.K.

(2) If a SIP contains provision for all, or more than one, of the following—

• free shares,

• partnership shares, and

• matching shares,

the plan may provide for the company to decide when the provisions relating to each kind of share are to have effect.

Group plans U.K.

4 (1) A SIP established by a company that controls other companies (a “parent company”) may extend to all or any of those other companies. U.K.

(2) In the SIP code a SIP established by a parent company which so extends is referred to as a “group plan”.

(3) In relation to a group plan a “constituent company” means—

(a) the parent company, or

(b) any other company to which for the time being the plan is expressed to extend.

(4) Paragraph 91 deals with jointly owned companies and companies controlled by them.

Meaning of “award of shares”, “participant” etc. U.K.

5 (1) For the purposes of the SIP code an “award of shares” is made under a SIP on each occasion when in accordance with the plan— U.K.

(a) free or matching shares are appropriated to employees, or

(b) partnership shares are acquired on behalf of employees.

(2) Accordingly, references to shares awarded to an individual under a SIP are to—

(a) free or matching shares appropriated to the individual, or

(b) partnership shares acquired on the individual’s behalf,

under the plan.

(3) For the purposes of the SIP code an individual participates in an award of free, matching or partnership shares under a SIP if shares included in that award are—

(a) in the case of an award of free or matching shares, appropriated to the individual, or

(b) in the case of an award of partnership shares, acquired on the individual’s behalf.

(4) In the SIP code, in relation to a SIP, “participant” means an individual to whom shares have been awarded under the plan.