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HMRC internal manual

Business Income Manual

HM Revenue & Customs
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Specific deductions: employee share schemes: providing shares to employees: Share Incentive Plans: introduction: contents

S488-S515, Sch2 Income Tax (Earnings and Pensions) Act 2003

Share Incentive Plans (SIPs) are ‘all employee’ share award plans introduced in 2000. They were originally known as All Employee Share Ownership Plans (AESOPs).

The Employee Shares and Securities Unit deals with the approval of schemes and notifies offices dealing with participating companies when schemes are approved.

Under SIP schemes:

  • companies can give up to £3000 worth of ‘free shares’ a year to each employee;
  • employees can buy up to £1500 worth of ‘partnership shares’ a year;
  • companies can reward this commitment by giving up to 2 ‘matching shares’ for each partnership share an employee buys;
  • ‘dividend shares’ can be purchased using money from dividends received in respect of plan shares.

The following paragraphs give guidance on deductions for trading companies for contributions to trusts set up in conjunction with approved SIPs. The statutory rules provide also for a deduction in computing the profits of a property business or as management expenses of a company with investment business.

BIM44253 General rules
BIM44255 Special rules for trusts acquiring 10 of ordinary share capital