Why use a share incentive plan (SIP)?

Produced by Tolley in association with

Employment Tax

Guidance

Background

Share Incentive Plans (SIPs) were originally known as 鈥楢ll Employee Share Ownership Plans鈥� and were first introduced over 20 years ago. Under a SIP, four types of share awards can be made to employees.

Employees can buy shares using their gross salary (partnership shares), the employer can make free awards of shares with or without the employee being required to buy shares first (free shares and matching shares), and dividends due on SIP shares can be paid in further awards of shares (dividend shares).

SIP shares are held in a separate SIP trust whilst they reside in the SIP plan. Due to the most advantageous tax treatment generally taking five years to achieve, SIPs can be an excellent employee retention tool.

Current limits

Different limits attach to each of the four types of SIP share award:

鈥�
free shares 鈥� 拢3,600 per year
鈥�
partnership shares 鈥� the lower of 拢1,800 or 10% of annual salary
鈥�
matching shares 鈥� two matching shares per one partnership share

Continue reading the full document

To gain access to additional expert tax guidance, workflow tools, and tax research, register for a free trial of Tolley+鈩�

TAKE A FREE TRIAL NOW

Helen Wood

Founder, HLN WD TX , Employment Tax

Helen Wood is the founder of HLN WD TX, a share schemes and employee incentives advisory business.She qualified as a CA with ICAS in 2009 and has worked as a specialist reward and incentives advisor for 17 years, spending 13 of those at KPMG followed by 3 陆 years as an Associate Director at RSM. Helen has worked with businesses ranging from start-ups to fully listed companies, spanning owner-managed businesses, private equity portfolio companies, and AIM listed businesses.She advises on a wide range of employee share schemes and employment related securities matters including the design and implementation of effective management and employee incentives; tax valuation of employment related securities, buy and sell side transaction support, HMRC compliance, tax due diligence and employee ownership trust transactions.

Popular Articles

Corporation Tax

Enterprise investment scheme tax relief

Enterprise investment scheme tax reliefOverview of EIS tax reliefsThe enterprise investment scheme (EIS) offers significant tax reliefs to encourage individuals to invest money in qualifying shares issued by qualifying unquoted companies. The scheme is designed to encourage investment in small,

14 Jul 2020 11:36 | Produced by Tolley Read more

Owner-Managed Businesses

Trade or hobby

Trade or hobbyInteraction of hobby farming rules and commercialityFarming has its own set of 鈥榟obby farming rules鈥�, which historically have stated that a profit must be made every six years. This is known as 鈥榯he five-year rule鈥�, in that there can be five years of losses but there must be a profit

14 Jul 2020 13:50 | Produced by Tolley Read more

Personal Tax

Enterprise management incentive schemes

Enterprise management incentive schemesWhat is an enterprise management incentive (EMI) scheme?The enterprise management incentive (EMI) scheme is a tax-advantaged share option employee incentive scheme aimed at small entrepreneurial companies that meet certain conditions. It is designed to assist

14 Jul 2020 11:36 | Produced by Tolley Read more