Share Incentive Plan meaning

Share incentive plan (SIP) A SIP lets companies that satisfy the scheme’s eligibility rules offer tax-advantaged share awards on an all-employee basis. The shares must be held and administered by a trustee who is resident in the UK. Within a SIP, four award types are available in total: free shares, partnership shares, matching shares and dividend shares...

A share incentive plan (SIP) A share incentive plan (SIP) permits companies that satisfy SIP eligibility criteria to grant tax-favoured share awards to all employees. The shares are required to be held by a trustee resident in the UK. Under a SIP, awards can comprise four categories in total: free shares, partnership shares, matching shares, and dividend shares...

A share incentive plan (SIP) enables employees to obtain shares in their employer, or a parent company of the employer, in a tax‑efficient manner, under a statutory scheme. The legislative framework for SIPs is found primarily in the following provisions: Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003), which describes how a SIP can be run and the principal conditions that must be met for the SIP to be a ‘Schedule 2 SIP’; ITEPA 2003, Pt 6 Ch 7 (ITEPA 2003, ss 488–515), which sets out the income tax treatment of shares obtained under a SIP. For more general background and context on SIPs, see Practice Note: What is a SIP? Set out below is a checklist of the key matters to consider before establishing or operating a SIP. It proceeds on the basis that the SIP Trust Deed and Rules comply with ITEPA 2003, Sch 2. See Precedents: SIP rules and SIP trust deed. Preliminary...

A company share option plan (CSOP) A company share option plan (CSOP) enables tax-favoured options over shares with a value up to £60,000 per person, assessed as at the grant date, to be awarded at the discretion of companies that satisfy the CSOP qualifying criteria, and is commonly adopted by companies that are too large to be eligible to issue enterprise management incentive (EMI) options...

In this issue: Corporate governance HMRC Manuals tracker Useful information Weekly highlights from other practice areas Corporate governance Ocado shareholders approve new remuneration policy At Ocado Group PLC’s AGM this week, investors backed a new directors’ remuneration policy (DRP), with 80.57% of votes cast in favour. The policy brings in a performance-linked long-term incentive scheme featuring annual rolling awards and a three-year measurement period, delivering a ‘base’ opportunity of 400% of salary for the CEO and 350% for the CFO where stretching goals are achieved. Those potential maxima are subject to a further multiplier of up to 1.5 times—taking them to 600% and 525% respectively—tied to Ocado’s relative TSR against the FTSE 100. For 2024, the CEO, Tim Steiner, will also see upside elements from the company’s contentious value creation plan folded into his grant (the plan itself will not run in 2024), including a heightened multiplier of 4.5 times the base award where exceptional share price performance is...

In this issue: Tax treatment Corporate Governance Useful information Weekly highlights from other practice areas Tax treatment HMRC publishes employee share schemes statistics for the tax year ending 2022 HMRC has released figures for the tax year to 2022 covering the tax-advantaged employee share schemes—company share option plans (CSOPs), enterprise management incentives (EMI), save as you earn (SAYE) and share incentive plans (SIPs). Drawn from share scheme returns, the data sets out how many companies run schemes, how many employees receive or are granted awards, the value of those awards, how many options are exercised, and estimates of the income tax and National Insurance contributions (NICs) relief obtained. Employees are estimated to have benefited from £840m of income tax relief and £560m of NICs relief in that year across the four schemes EMI accounted for the largest share of total relief at £680m Relief on CSOP options stayed far below other schemes at £50m...

In this issue: Corporate governance Useful information HMRC Manuals tracker Dates for your diary Weekly highlights from other practice areas Corporate governance Banks change approach for climate targets in executive pay The 2024 annual reports of NatWest Group plc and Barclays PLC indicate a change in how both banks link climate-related objectives to executive remuneration—shifting emphasis from short-term bonus plans to long-term incentive awards. At NatWest, where annual bonuses previously carried a 10% climate weighting, future non-financial elements of the bonus will prioritise customer, colleague and simplification outcomes. These will run alongside a proposed performance share plan expected to assign 15% to sustainability measures, including climate targets. NatWest plans to incorporate these features into new pay proposals to be presented to shareholders for approval at its AGM on 23 April 2025 as part of an updated directors’ remuneration policy. Barclays, which outlined new executive pay proposals last week (see News Analysis: Share Incentives weekly highlights—13 February 2025—Corporate governance),...

The company establishing a SIP The company setting up a share incentive plan (SIP) does not need to be the same entity whose shares are allocated. However, both: the shares to be granted, and the connection between the SIP-establishing entity and the company whose shares are issued must satisfy the relevant legislative conditions. A SIP can be created either: solely for employees of the company that establishes it; or for those employees and for employees of other companies it controls (a group plan)—see Constituent companies below. In a group where the parent company’s shares are to be awarded, there are two options: the parent company may establish the SIP and extend it to the appropriate subsidiaries; or each subsidiary may establish its own SIP, provided the other statutory requirements concerning the shares under award are met—see Requirements for the shares. The advantage of each subsidiary operating its...

ARCHIVED : This archived Practice Note offers context on the key distinctions between the SIP guidance in ESSUM and the places it can now be located within ETASSUM. It also sets out any material differences in the guidance. This Practice Note reflects the position as at December 2015 and is intended solely for background reference. Background On 28 October 2015, HMRC announced a new Employee Tax Advantaged Share Scheme User Manual (ETASSUM), which is available on its Gov.uk website. At the time of writing, the earlier guidance in ESSUM remains live and can still be accessed. As its name suggests, ETASSUM covers enterprise management incentives (EMI) schemes, company share option plans (CSOPs), save as you earn (SAYE) schemes and share incentive plans (SIPs). ETASSUM is not yet in its final form and, at the time of preparing this Practice Note, certain links are still missing. Each page contains a feedback link that can be used to alert HMRC to any problems. The table below presents a summary...

At any one time, an individual can be employed by more than one employer, commonly working on a part-time basis for each business. Those businesses might belong to the same group or be entirely unconnected to one another. Participation in numerous Share incentives glossary A–Z—Unapproved share option arrangements is generally not problematic; accordingly, this note concentrates on examining the effect of such simultaneous employments on an employee’s capacity to participate in HMRC statutory tax-advantaged plans, namely: enterprise management incentives (EMI) schemes company share option plan (CSOPs) share incentive plans (SIPs), and save as you earn (SAYE) schemes For more general information on each of these schemes, see Practice Notes: How EMI schemes work and key features How CSOPs work and key features How SAYE schemes work and key features What is a SIP? This Practice Note examines the definitions of connected, group, qualifying subsidiaries, associated and constituent companies for each tax-advantaged share...

[ insert name of company who granted the award pursuant to the long term incentive plan (LTIP) ] ( Company ) [ insert name of LTIP ] ( Plan ) Name Quantity of Shares under the Matched Award Grant Date Standard vesting date[, subject to meeting the Performance Targets] End of Holding Period This confirms that you are the holder of a Matched Award conferring the right to acquire up to the maximum number of Shares in [ insert name of Company whose shares are being granted under both invested and where relevant Matched Awards ], as detailed in the table above...

[ insert name of company who granted the option pursuant to the long term incentive plan (LTIP) ] ( Company ) [ insert name of LTIP ] ( Plan ) Name Number of Shares under Option Option Price per Share Date of Grant Normal Vesting date [ , subject to satisfaction of Performance Targets ] End of Holding Period We hereby confirm that you hold an Option permitting you to acquire up to the maximum number of Shares in [ insert name of Company whose shares are being granted under option ] as shown in the table above. The Option was issued on the Date of Grant set out above under a global deed of grant entered into by the Company [ and is conditional upon the Performance Target(s) attached to this certificate ]. The Option Price due per Share when the Option is exercised is likewise specified in the table above...

[ insert name of company ] Trust deed [ insert name of company ] Share Incentive Plan This Deed is dated and entered into BETWEEN [ INSERT NAME OF COMPANY ], a company registered in England and Wales under number [ insert company number ] (the Company), whose registered office is at [ insert address of company ]; [ INSERT NAME OF TRUSTEE ], a company registered in England and Wales under number [ insert company number ] whose registered office is [ insert address of trustee ] (the Trustee). Whereas: The Company intends to establish a share incentive plan titled the [ insert name of company ] Share Incentive Plan (the Plan), which meets the requirements of Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003. The creation of the Plan was authorised by a resolution of the Board passed on [ insert date on which the board resolution was passed ]. The...