Share incentive plans ― an overview

Produced by Tolley in association with

Employment Tax

Guidance

Article Summary

This guidance note provides an overview of share incentive plans (SIPs), which are tax-advantaged employee share schemes available to UK companies. SIPs allow employees to buy shares out of their pre-tax salary and receive free or matching shares from their employer. The shares are held in a SIP trust and if kept in the trust for sufficient time, can be withdrawn free of income tax and NICs. SIPs must be offered to all UK employees, subject to limited exclusions. The company must notify HMRC annually that the SIP meets the requirements and file annual returns. Different types of shares - free, partnership, matching and dividend shares - can be provided under a SIP. Shares must be held for 3-5 years to get full tax benefits. SIPs offer employees a tax-efficient way to buy shares in their employer and allow employers to incentivise staff.

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Helen Wood

, Employment Tax

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