ETASSUM20100 | Schedule 2 share incentive plan (SIP): Introduction – Contents

ETASSUM20110 Tax Advantaged Status: Notification

ETASSUM20120 The Plan

ETASSUM20130 Conditions for participation

ETASSUM20140 Types of award

This section explains the layout of the guidance notes on Schedule 2 Share Incentive Plans (SIPs) and gives a brief explanation of the main requirements.

The legislation relating to the requirements of SIPs was introduced by Finance Act 2000 and is now consolidated in Sections 488 – 515 and Schedule 2 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA), which together with Part 1 Schedule 7D Taxation of Chargeable Gains Act 1992 (TCGA) and certain other provisions mentioned in Section 515 ITEPA form the “SIP code”.

Under these schemes employees are awarded shares in their employing company or a company which controls the employer. If certain conditions are satisfied no liability to income tax arises when the shares are awarded or (if the shares are held for a certain period) when they are withdrawn from the plan. Schedule 2 SIPs must be open to all eligible employees. Prior to 6 April 2014, the company had to obtain HMRC approval that the scheme met the conditions of Schedule 2 before the company could operate the scheme. This changed from 6 April 2014. From that date HMRC do not approve schemes instead the company is required to self certify the scheme in the prescribed manner, within the appropriate time limit by notifying HMRC of the scheme and providing a declaration that the requirements of Schedule 2 ITEPA were and are met at the appropriate times. A SIP is a Schedule 2 SIP provided it has been correctly self certified within the prescribed time limit.

Statutory provisions and requirements

The statutory provisions and requirements are: