BIM44251 | Specific deductions: employee share schemes: providing shares to employees: Share Incentive Plans: introduction: contents

S488-S515, Sch2 Income Tax (Earnings and Pensions) Act 2003

Share Incentive Plans (SIPs) are ‘all employee’ share award plans introduced in 2000. They were originally known as All Employee Share Ownership Plans (AESOPs).

Before 6th April 2014, the Employee Shares and Securities Unit dealt with the approval of schemes and notified offices dealing with participating companies when schemes were approved. From 6th April 2014, this is no longer a requirement; the scheme organiser can self-certify that the scheme meets the necessary conditions to be a Schedule 2 SIP and makes a declaration to HMRC, see etassum11300

Under SIP schemes:

• companies can give up to £3600 worth of ‘free shares’ a year to each employee;

• employees can buy up to £1800 worth of ‘partnership shares’ a year;

• companies can reward this commitment by giving up to 2 ‘matching shares’ for each partnership share an employee buys;

• ‘dividend shares’ can be purchased using money from dividends received in respect of plan shares.

The following paragraphs give guidance on deductions for trading companies for contributions to trusts set up in conjunction with Schedule 2 SIPs. The statutory rules provide also for a deduction in computing the profits of a property business or as management expenses of a company with investment business.