Share Incentive Plans or SIPs meaning

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...

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: Tax treatment Corporate governance Employee benefit trusts Trackers Useful information Dates for your diary Weekly highlights from other practice areas Tax treatment HMRC publishes employee share schemes statistics for the tax year ending 2024 HMRC has released statistics for the tax year ending 2024 covering 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 data, the figures set out how many companies currently operate such schemes, the numbers of employees receiving grants or the volume of awards made, the aggregate values granted, how many employees go on to exercise options and HMRC’s estimates of the income tax and national insurance contributions (NICs) relief obtained...

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...

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...

A business might need to secure extra capital for a variety of purposes. It could, for example, be to finance a planned acquisition or to satisfy continuing financial commitments. There are several routes by which a company can obtain the extra funding required, including tapping existing shareholders through a rights issue, an open offer or a placing. When running a rights issue, open offer or placing, the company must carefully assess the effect on any current employee share plans it operates. This assessment should take place as early as possible in the decision-making process to determine whether, and if so what, steps can be taken so that employees are not put at an unfair disadvantage by a rights issue, open offer or placing. This Practice Note outlines the key points that typically arise in connection with employee share plans on a rights issue, open offer or placing, the steps that will usually need to be taken in relation to outstanding options and awards, and the relevant tax treatment. ...