SCHEDULES
SCHEDULE 2F3... share incentive plans
Part 9Trustees
Requirements etc. relating to trustees: introduction
70
1
A SIP must meet the plan requirements contained in—
paragraph 71(1) and (2) (establishment of trustees), and
paragraph 79 (meeting by trustees of PAYE obligations).
2
The following provisions also relate to the trustees—
paragraph 71(3) to (6) (the trust instrument and classes of trustees)
paragraph 72 (duty to act in accordance with participant’s directions),
paragraph 73 (duty not to dispose of plan shares),
paragraph 74 (duty to make payments to participants),
paragraph 75 (duty to give notice of award of shares etc.),
paragraph 76 (power to borrow),
paragraph 77 (power to raise funds to subscribe for rights issue), F12and
F4...
paragraph 80 (other duties in relation to tax liabilities).
Establishment of trustees
71
1
The plan must provide for the establishment of a body of trustees consisting of persons resident in the United Kingdom (“the trustees”).
2
The plan must provide that the trustees are required—
a
in the case of free or matching shares, to acquire shares and appropriate them to employees in accordance with the plan,
b
in the case of partnership shares, to apply partnership share money in acquiring shares on behalf of employees in accordance with the plan, and
c
in the case of dividend shares, to apply cash dividends in acquiring shares on behalf of participants in accordance with the plan.
3
The functions of the trustees with respect to shares held by them must be regulated by a trust (“the plan trust”)—
a
which is constituted under the law of a part of the United Kingdom, and
b
the terms of which are embodied in an instrument which complies with the requirements of this Part of this Schedule (“the trust instrument”).
4
The trust instrument must not contain any terms which are neither essential nor reasonably incidental to complying with the requirements of this Part of this Schedule.
5
The trust instrument may contain terms that—
a
define who is a professional trustee and who is a non-professional trustee;
b
require the trustees to include at least one person who is a professional trustee and at least two who are non-professional trustees;
c
require at least half of the non-professional trustees to have been, before being appointed as trustees, selected in accordance with a specified process of selection;
d
require the trustees so selected to be persons who are employees of the company or, in the case of a group plan, of a participating company.
6
The terms mentioned in sub-paragraph (5) are to be regarded as reasonably incidental to complying with the requirements of this Part of this Schedule for the purposes of sub-paragraph (4).
F9Duty to monitor participants in connected schemes
Sch. 2 para. 71A and cross-heading inserted (10.7.2003) by Finance Act 2003 (c. 14), Sch. 21 para. 6
71A
The trust instrument must require the trustees to maintain records of participants who have participated in one or more other F11Schedule 2 SIPs established by the company or a connected company.
Duty to act in accordance with participant’s directions
72
1
The trust instrument must require the trustees—
a
to dispose of a participant’s plan shares, and
b
to deal with any right conferred in respect of any of a participant’s plan shares to be allotted other shares, securities or rights of any description,
only in accordance with a direction given by or on behalf of the participant.
2
Sub-paragraph (1) is subject to—
a
paragraph 73 (duty not to dispose of plan shares), and
b
any provision in the plan made in accordance with paragraph 79 (meeting by trustees of PAYE obligations).
3
The plan may provide for participants to give such general directions, to such effect and in such terms, as are specified in the plan.
Duty to make payments to participants
74
1
The trust instrument must require the trustees to pay over to a participant as soon as practicable—
a
any money received by them in respect of, or by reference to, any of the participant’s shares, or
b
any money’s worth so received unless it consists of new shares within the meaning of paragraph 87 (company reconstructions).
2
Sub-paragraph (1) is subject to—
a
paragraphs 62 to 69 (cash dividends and dividend shares),
b
the trustees' obligations under sections 510 to 514 (PAYE: shares ceasing to be subject to plan; capital receipts), and
c
the trustees' PAYE obligations.
Power of trustees to borrow
76
The trust instrument may provide that the trustees have power to borrow—
a
to acquire shares for the purposes of the plan, and
b
for such other purposes as may be specified in the trust instrument.
Power of trustees to raise funds to subscribe for rights issue
77
1
The trustees may dispose of some of the rights arising under a rights issue in order to be able to obtain sufficient funds to exercise other such rights.
2
The power conferred by sub-paragraph (1) is subject to paragraph 72 (duty to act in accordance with participant’s directions).
Meeting by trustees of PAYE obligations
79
1
The plan must make provision to ensure that, where a PAYE obligation is imposed on the trustees as a result of any of a participant’s plan shares ceasing to be subject to the plan, the trustees are able to meet that obligation—
a
by disposing of any of those shares, or
b
if there are any remaining plan shares of the participant, by disposing of any of those shares, or
c
by the participant paying to the trustees a sum equal to the amount required to discharge the obligation.
2
A “PAYE obligation” includes an obligation under any of sections 510 to 512 (PAYE: shares ceasing to be subject to the plan).
3
For the purposes of sub-paragraph (1) any reference to the trustees disposing of shares includes a reference to their acquiring the shares as trustees for the purposes of the trust.
4
A disposal of any of the participant’s plan shares in accordance with provision made under sub-paragraph (1)(b) may give rise to a charge to tax under—
section 505 (charge on free or matching shares ceasing to be subject to plan),
section 506 (charge on partnership shares ceasing to be subject to plan), or
F5Chapter 3 or 4 of Part 4 of ITTOIA 2005 (dividends etc. from UK or non-UK resident companies etc.) as a result of section 394(2) or 407(2) of that Act (distribution or dividend payment when dividend shares cease to be subject to plan).
Other duties of trustees in relation to tax liabilities
80
1
The trust instrument must require the trustees to maintain such records as may be necessary for the purposes of—
a
their own PAYE obligations, or
b
the PAYE obligations of the employer company so far as they relate to the plan.
2
In sub-paragraph (1)—
“PAYE obligations”, in relation to the trustees, includes obligations under sections 510 to 514 (PAYE: shares ceasing to be subject to plan and capital receipts);
“the employer company” has the same meaning as in section 513.
3
The trust instrument must require the trustees, where the participant becomes liable to income tax under—
a
this Act, or
b
F10Chapter 3 or 4 of Part 4 of ITTOIA 2005 (dividends etc. from UK or non-UK resident companies etc.),
by reason of the occurrence of any event, to inform the participant of any facts relevant to determining that liability.
4
F8Sections 1105 to 1108 of CTA 2010 (information relating to distributions to be provided by nominee) apply in relation to—
a
the balance of any cash dividend paid over to the participant under paragraph 64(3),
b
any amount paid over to a participant under paragraph 68(4) (dividend retained for reinvestment and later paid out), or
c
any relevant dividend (see sub-paragraph (5)),
as if it were a payment to which F6section 1105(1)(b) of that Act applied (and, in the case of an amount within paragraph (b) above, as if the cash dividend had been paid at the time of the payment to the participant under paragraph 68(4)).
5
In a case where dividend shares cease to be subject to the plan before the end of the period of 3 years beginning with the date on which they were acquired on a participant’s behalf, the cash dividend applied to acquire dividend shares on the participant’s behalf is a “relevant dividend” for the purposes of sub-paragraph (4)(c).
Word in Sch. 2 title omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 14, 89 (with Sch. 8 paras. 90-96)