In the SIP code, in relation to a SIP—

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”).

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

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

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

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

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

A SIP must meet the plan requirements contained in—

• paragraph 7 (the purpose of the plan),

• paragraph 8 (all-employee nature of plan),

• paragraph 9 (participation on same terms),

• paragraph 10 (no preferential treatment for directors and senior employees),

• paragraph 11 (no further conditions), and

• paragraph 12 (no loan arrangements).

The requirements of this Part are also to be taken to include the requirements of paragraphs 89 and 90 (plan termination notices etc).

The purpose of the plan must be to provideF75, in accordance with this Schedule, benefits to employees in the F76form of shares in a company which give them a continuing stake in that company.

The plan must not provide benefits to employees otherwise than in accordance with this Schedule.

For example, the plan must not provide cash to employees as an alternative to shares.

Sub-paragraph (1A) does not prohibit an employee receiving a benefit from a company as a result of any shares in that company being held on the employee's behalf under the plan where the employee would have received the same benefit from the company had the shares been acquired by the employee otherwise than by virtue of the plan.

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The plan must not contain any feature which has or is likely to have the effect of discouraging any description of employees within sub-paragraph (1) from participating in an award of shares under the plan.

Sub-paragraph (3) does not apply to any provision required or authorised by this Schedule.

The requirement of this paragraph is infringed by the awarding of free shares by reference to factors other than those mentioned in sub-paragraph (3).

In sub-paragraph (5) “performance allowances” has the meaning given in paragraph 34(4).

In the case of an award of partnership shares, the requirement of this paragraph is not infringed by the operation of any percentage limit specified in or under paragraph 46(2) or (3) (maximum amount of deductions) so far as the application of that limit to employees with different levels of remuneration results in deductions of different amounts or in the award of different numbers of shares.

The second requirement of this paragraph applies only if the plan is established by a company that is a member of a group.

The requirements of this paragraph are not infringed by the awarding of free shares in circumstances where (as a result of paragraph 9(3) and (4)) that would not constitute an infringement of the requirements of paragraph 9.

The operation of the plan must not be associated in any way with such loans.

In sub-paragraph (1) “arrangements” includes any scheme, agreement, undertaking or understanding, whether or not legally enforceable.

The plan must provide that an individual may only participate in an award of shares if the individual is eligible to participate in the award at the appropriate time mentioned below.

In the case of an award of free shares, the appropriate time is the time when the award is made.

In the case of an award of partnership shares where the plan does not provide for an accumulation period, the appropriate time is the time of the deduction of the partnership share money relating to the award.

In the case of an award of partnership shares where the plan does provide for an accumulation period, the appropriate time is the time of the first deduction of partnership share money relating to the award.

In the case of an award of matching shares where the plan does not provide for an accumulation period, the appropriate time is the time of the deduction of the partnership share money relating to the award of partnership shares to which the matching shares relate.

In the case of an award of matching shares where the plan does provide for an accumulation period, the appropriate time is the time of the first deduction of partnership share money relating to the award of partnership shares to which the matching shares relate.

In the case of an individual within paragraph 8(5) (all-employee nature of plan: non-UK resident taxpayer), the individual is not eligible to participate in an award of shares under the plan unless (in addition to the requirements mentioned in sub-paragraph (7)) any further eligibility requirements of the plan are met.

The plan must provide that an individual is not eligible to participate in an award of shares unless the individual meets the requirement in sub-paragraph (2).

In the SIP code “the employment requirement” means the requirement in sub-paragraph (2).

This paragraph applies if the plan provides for a qualifying period in relation to an award.

In the case of an award of free shares, the qualifying period must be a period of not more than 18 months ending with the date on which the award is made.

In the case of an award of partnership shares where the plan does not provide for an accumulation period, the qualifying period must be a period of not more than 18 months ending with the deduction of partnership share money relating to the award.

In the case of an award of partnership shares where the plan does provide for an accumulation period, the qualifying period must be a period of not more than 6 months ending with the start of the accumulation period relating to the award.

In the case of an award of matching shares where the plan does not provide for an accumulation period, the qualifying period must be a period of not more than 18 months ending with the deduction of partnership share money relating to the award of partnership shares to which the matching shares relate.

In the case of an award of matching shares where the plan does provide for an accumulation period, the qualifying period must be a period of not more than 6 months ending with the start of the accumulation period relating to the award of partnership shares to which the matching shares relate.

The plan may authorise the company to specify different qualifying periods in respect of different awards of shares, but the requirements in sub-paragraphs (2) to (7) apply to periods so specified.

For the purposes of paragraph 15(2) “qualifying company” has the meaning given by this paragraph.

For the purposes of this paragraph an individual is to be treated as having participated in an award of free shares under a SIP if the individual would have participated in that award but for the individual’s failure to obtain a performance allowance (see paragraph 34).

In this paragraph “connected company” means— (a)a company which controls or is controlled by the company or which is controlled by a company which also controls the company, or (b)a company which is a member of a consortium owning the company or which is owned in part by the company as a member of a consortium.

In this paragraph “connected company” has the same meaning as in paragraph 18.

For the purposes of sub-paragraph (1)(a) shares are not to be regarded as fully paid up if there is an undertaking to pay cash at a future date to the company whose shares they are.

For the purposes of sub-paragraph (1)(b) “redeemable” shares include shares that may become redeemable at a future date.

Sub-paragraph (1)(b) does not apply to shares in a registered industrial and provident society which is a co-operative society.

In sub-paragraph (4)—

For the purposes of sub-paragraph (2)(b)(iii) a company is associated with another company if both companies are under the control of the same person or persons.

For the purposes of this paragraph the question whether a person controls a company is to be determined in accordance with F94sections 450 and 451 of CTA 2010.

The plan must provide that the initial market value of the free shares awarded to a participant in a tax year is not to exceed F96£3,600 .

The “initial market value” of shares means their market value on the date on which they are awarded.

The Treasury may by order amend sub-paragraph (1) by substituting for any amount for the time being specified there an amount specified in the order.

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If at any time in the holding period the participant ceases to be in relevant employment, the participant’s obligations with respect to that period come to an end.

A participant may direct the trustees to do any of the following during the holding period.

The participant may direct the trustees to accept an offer for any of the participant’s free shares (“the original shares”) if the acceptance or agreement will result in a new holding being equated with the original shares for the purposes of capital gains tax.

In sub-paragraph (5) “control” has the meaning given by F100sections 450 and 451 of CTA 2010.

For the purposes of sub-paragraph (5) it does not matter if the general offer is made to different shareholders by different means.

If in the case of a takeover offer (as defined in section 974 of the Companies Act 2006) there arises a right under section 983 of that Act to require the offeror to acquire the participant's free shares, or such of them as are of a particular class, the participant may direct the trustees to exercise that right.

A plan that provides for performance allowances must comply with the following requirements with respect to performance targets and performance measures.

The performance targets must be set for performance units comprising one or more employees.

For the purposes of an award of free shares under the plan an employee must not be a member of more than one performance unit.

The notices must be given as soon as reasonably practicable.

The company may exclude from the notice mentioned in sub-paragraph (1)(b) any information whose disclosure the company reasonably considers would prejudice commercial confidentiality.

The requirements of this paragraph are those contained in sub-paragraph (2).

In determining for the purposes of sub-paragraph (2)(a) whether the requirement of paragraph 9 is met, the shares to which sub-paragraph (2)(a) applies are to be treated as a separate award of free shares.

If the plan meets the requirements of this paragraph, the requirement of paragraph 9 does not apply to any provision of the plan relating to the awarding of shares within sub-paragraph (2)(b).

If free shares of different classes are awarded, the requirements of this paragraph apply separately in relation to each class.

The requirements of this paragraph are those contained in sub-paragraphs (2) and (3).

The performance targets set in connection with such an award must be consistent targets (see sub-paragraph (6)).

In determining for the purposes of sub-paragraph (2)(b) whether the requirement of paragraph 9 is met, the free shares awarded in respect of each performance unit are to be treated as a separate award of free shares.

If this method is used, nothing in paragraph 9 requires the awarding of shares to members of different performance units to be on the same terms.

In sub-paragraph (3) “consistent targets” means targets which, at the time when they are set in accordance with the plan, can reasonably be viewed as being comparable in terms of the likelihood of their being met by the performance units to which they apply.

Such agreements are referred to in the SIP code as “partnership share agreements”.

In sub-paragraph (1) “the employer company” means the company by reference to which the employee meets the employment requirement in relation to the plan.

The plan must provide for a partnership share agreement to be given effect by deductions from the employee’s salary.

Amounts so deducted are referred to in the SIP code as “partnership share money”.

For the purposes of sub-paragraph (3)(a) the agreement may specify a percentage of the employee’s salary.

The plan must require the employer company to calculate the amounts and intervals having regard to paragraph 46 (maximum amount of deductions from salary).

In sub-paragraph (5) “the employer company” means the company by reference to which the employee meets the employment requirement in relation to the plan.

The amount of partnership share money deducted from an employee’s salary must not exceed F104£1,800 in any tax year.

The amount of partnership share money deducted from an employee’s salary F105for any tax year must not exceed 10% of the employee’s salary for the tax year.

The plan may authorise the company to specify lower limits than those specified in sub-paragraphs (1) and (2).

If it does so, different limits may be specified in relation to different awards of shares.

Any amount deducted in excess of that allowed by sub-paragraph (1) or (2), or any lower limit in the plan, must be paid over to the employee as soon as practicable.

The Treasury may by order amend sub-paragraph (1) by substituting for any amount for the time being specified there an amount specified in the order.

The plan may provide that the amount to be deducted under a partnership share agreement F108on any occasion must not be less than a minimum amount specified in the plan.

The specified minimum amount must not be greater than £10.

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The plan must provide that the company may not enter into a partnership share agreement with an employee unless the agreement contains a notice under this paragraph.

A notice under this paragraph is a notice in a prescribed form containing prescribed information as to the possible effect of deductions on an employee’s entitlement to social security benefits, statutory sick pay and statutory maternity pay.

In this paragraph “prescribed” means prescribed by regulations made by F20the Commissioners for Her Majesty’s Revenue and Customs.

Sub-paragraph (1) is subject to paragraphs 50(5)(b) and 52(6)(b) and (7) (obligations to pay money to the employee).

The plan must provide for the trustees to account to an employee for the interest if the partnership share money held on behalf of the employee is held in an interest bearing account.

If the plan does not provide for an accumulation period, it must provide for partnership share money to be applied by the trustees in acquiring partnership shares on behalf of the employee on the acquisition date.

The number of shares awarded to each employee must be determined in accordance with the market value of the shares on the acquisition date.

Sub-paragraphs (1) and (2) are subject to paragraph 53 (restriction on number of shares awarded).

In those sub-paragraphs “the acquisition date” means the date set by the trustees in relation to the award of partnership shares, which must be not later than 30 days after the last date on which the partnership share money to be applied in acquiring the shares was deducted.

The plan may provide for accumulation periods not exceeding 12 months.

If the plan does so, the following provisions apply.

This paragraph applies if the plan provides for one or more accumulation periods.

The plan must provide for the partnership share money deducted in each accumulation period under a partnership share agreement to be applied by the trustees in acquiring partnership shares on behalf of the employee on the acquisition date.

The number of shares awarded to the employee must be determined in accordance with one of sub-paragraphs (3), (3A) and (3B) and the partnership share agreement must specify which one of those sub-paragraphs is to apply for the purposes of the agreement.

If the agreement specifies that this sub-paragraph is to apply, the number of shares awarded to the employee must be determined in accordance with the market value of the shares at the beginning of the accumulation period.

If the agreement specifies that this sub-paragraph is to apply, the number of shares awarded to the employee must be determined in accordance with the market value of the shares on the acquisition date.

Sub-paragraphs (2) F115to (3B) are subject to sub-paragraphs (7) and (8) and to paragraph 53 (restriction on number of shares awarded).

In sub-paragraphs (2) F115to (3B) “the acquisition date” means the date set by the trustees in relation to the award of partnership shares, which must be not later than 30 days after the end of the accumulation period which applies in relation to the award.

The plan must provide that where the employee ceases to be in relevant employment during an accumulation period, any partnership share money deducted in the period is to be paid over to the individual as soon as practicable.

The partnership share agreement may provide that, where an accumulation period comes to an end on the occurrence of a specified event, the partnership share money deducted in that period must be paid over to the individual as soon as practicable instead of being applied in acquiring shares.

The plan may authorise the company to specify the maximum number of shares (“the award maximum”) to be included in an award of partnership shares.

The plan must require partnership share agreements to contain an undertaking by the company to notify the employee of any restriction on the number of shares to be included in an award.

The plan must provide that, where the award maximum in respect of an award of partnership shares is smaller than the number of shares which would otherwise be included in the award, the number of partnership shares acquired on behalf of each employee under paragraph 50(1) or 52(2) must be reduced proportionately.

The plan must provide that an employee may at any time give notice to the company to stop deductions under a partnership share agreement.

The plan must provide that, unless a later date is specified in the notice, the company must, on receiving a notice within sub-paragraph (1), ensure within 30 days after receipt of the notice that no further deductions are made by it under the partnership share agreement.

If the plan makes provision for one or more accumulation periods, it may prevent an employee re-starting deductions more than once in any accumulation period.

The plan must provide that, unless a later date is specified in the notice, the company must, on receiving a notice within sub-paragraph (3), re-start deductions under the partnership share agreement not later than the re-start date.

“The re-start date” means the date of the first deduction due under the partnership share agreement more than 30 days after receipt of the notice under sub-paragraph (3).

In this paragraph “notice” means notice in writing.

The plan must provide that an employee may at any time give notice to the company of the employee’s withdrawal from a partnership share agreement.

The plan must provide that, unless a later date is specified in the notice, a notice of withdrawal takes effect 30 days after it is received by the company.

The plan must provide that, where an employee withdraws from a partnership share agreement, any partnership share money held on behalf of the employee is to be paid over to the employee as soon as practicable.

In this paragraph “notice” means notice in writing.

The plan must provide that, where the F117plan is not to be a Schedule 2 SIP by virtue of paragraph 81H or 81I, any partnership share money held on behalf of an employee is to be paid over to the employee.

The plan must require the payment to be made as soon as practicable after F118the relevant day.

The plan must provide that, where a plan termination notice is issued in respect of the plan (see paragraph 90), any partnership share money held on behalf of an employee is to be paid over to the employee.

The plan must require the payment to be made as soon as practicable after the plan termination notice is notified to the trustees under paragraph 89(2).

The plan must provide that when partnership shares have been awarded to an employee, the employee may at any time withdraw any or all of the partnership shares from the plan.

If the employee does so, there may be a charge to tax by virtue of section 506 (charge on partnership shares ceasing to be subject to plan).

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The ratio must not exceed 2:1 and must be applied by reference to the number of shares.

A partnership share agreement must provide for the employee to be informed by the company if the ratio offered by the company changes before partnership shares are awarded to the employee under the agreement.

The Treasury may by order amend sub-paragraph (2) by substituting for any ratio for the time being specified there a ratio specified in the order.

Sub-paragraph (1) is subject to paragraph 63 (requirements to be met as regards cash dividends).

The company may F124modify or revoke a direction requiring the reinvestment of cash dividends.

References in the SIP code to the trustees acquiring dividend shares on behalf of a participant include their appropriating to a participant shares already held by them.

Dividend shares may (notwithstanding sub-paragraph (1)(b) if relevant) be subject to provision requiring dividend shares acquired on behalf of an employee to be offered for sale but only if the requirement of sub-paragraph (3) is met.

The plan must provide that the trustees must treat participants fairly and equally in exercising their powers in relation to the acquisition of dividend shares.

The plan must provide for the trustees to acquire dividend shares on behalf of participants on the acquisition date.

The number of dividend shares acquired on behalf of each participant must be determined in accordance with the market value of the shares on the acquisition date.

In this paragraph “the acquisition date” means the date set by the trustees for the acquisition of dividend shares and falling not later than 30 days after the dividend is received by them.

This paragraph applies where an amount is not reinvested because it is not sufficient to acquire a share.

The amount may be retained by the trustees and carried forward to be added to the amount of the next cash dividend to be reinvested.

If so retained, the trustees must hold the amount so as to be separately identifiable for the purposes of sub-paragraphs (4) and (5).

An amount required to be paid over to the participant under sub-paragraph (4) must be paid over as soon as practicable.

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The plan must require any distributable cash dividends in respect of plan shares held on behalf of a participant to be paid over to the participant as soon as practicable.

“Distributable cash dividends” means cash dividends F133so far as they are not required to be reinvested under the plan.

The plan must provide for the establishment of a body of trustees consisting of persons resident in the United Kingdom (“the trustees”).

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.

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).

The plan may provide for participants to give such general directions, to such effect and in such terms, as are specified in the plan.

This paragraph applies to a participant’s plan shares that are free, matching or dividend shares.

The trust instrument must prohibit the trustees from disposing of any of those shares (to the participant or otherwise) at any time during the holding period, unless the participant has at that time ceased to be in relevant employment.

The trust instrument must make the following provision regarding notices.

It must provide that, where any foreign cash dividend is received in respect of plan shares held on behalf of a participant, the trustees must give the participant notice of the amount of any foreign tax deducted from the dividend before it was paid.

In sub-paragraph (5) “foreign cash dividend” means a cash dividend paid in respect of plan shares in a company not resident in the United Kingdom.

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.

The power conferred by sub-paragraph (1) is subject to paragraph 72 (duty to act in accordance with participant’s directions).

A “PAYE obligation” includes an obligation under any of sections 510 to 512 (PAYE: shares ceasing to be subject to the plan).

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.

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—

In sub-paragraph (1)—

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).

For a SIP to be a Schedule 2 SIP, notice of the SIP must be given to Her Majesty's Revenue and Customs (“HMRC”).

If notice is given under this paragraph in relation to a SIP, for the purposes of the SIP code the SIP is to be a Schedule 2 SIP at all times on and after the relevant date (but not before that date).

But if the notice is given after the initial notification deadline, the SIP is to be a Schedule 2 SIP only from the beginning of the relevant tax year.

For the purposes of this Part—

• “the initial notification deadline” is 6 July in the tax year following that in which the first award date falls,

• “the relevant date” is—

  1. (a)

     the date on which the declaration within sub-paragraph (3) is made, or

  2. (b)

     if that declaration is made after the first award date, the first award date, and

• “the relevant tax year” is—

  1. (a)

     the tax year in which the notice under this paragraph is given, or

  2. (b)

     if that notice is given on or before 6 July in that tax year, the preceding tax year.

Sub-paragraph (4) is subject to the following paragraphs of this Part.

This paragraph applies if notice is given in relation to a SIP under paragraph 81A.

The company must give to HMRC a return for the tax year in which the relevant date falls and for each subsequent tax year (subject to sub-paragraph (9)).

If paragraph 81A(5) applies in relation to the SIP, in sub-paragraph (2) the reference to the tax year in which the relevant date falls is to be read as a reference to the relevant tax year.