Share Incentive Plan
The H M Revenue & Customs Share Incentive Plan is the most tax efficient employee share plan to be introduced by a UK government.
The Share Incentive Plan involves the setting up of a Trust that will acquire shares and allocate them to participants in accordance with the rules of the Share Incentive Plan.
The Share Incentive Plan comprises three main parts under which Free Shares, Partnership Shares and Matching Shares may be awarded. Companies may choose which parts to adopt.
Free Shares : These are shares given free of charge to each employee subject to a maximum value of £3000 in any tax year. They are normally subject to a holding period of between 3 years and 5 years.
Partnership Shares : These are shares with a value, at the acquisition date, of up to £1500 or 10% of salary in the tax year (whichever is lower) bought by the participating employee with pre-tax salary (i.e. before tax and National Insurance Contributions).
Matching Shares : These are free shares given by employers for every partnership share in the company that an employee purchases. The maximum ratio is 2 Matching Shares to 1 Partnership Share.
Dividend Shares : These shares are acquired through the re-investment of dividends received in respect of shares held in the Share Incentive Plan, subject to a maximum value of £1500 per annum.
The income tax treatment will depend on the length of time the shares remain in the Share Incentive Plan.
Broadly shares held:
Likewise, the capital gains treatment will depend on the length of participation in the Share Incentive Plan.
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This briefing has been prepared for general guidance only and should not be acted upon without specific advice. Please contact us if you need further information.
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