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HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

Schedule 2 share incentive plan (SIP): General requirements: All-employee nature of the plan

The plan must be open to all employees who are:

  • eligible under the SIP Code (paragraph 8(1)), and are
  • UK resident taxpayers (paragraph 8(1)(b) - see below).

Although companies must offer participation to all eligible employees, the employees themselves may of course decide not to take part.

A “UK resident taxpayer” is an employee who is liable to UK tax under Section 15 ITEPA on general earnings in respect of the employment by reference to which he is eligible to participate (see ETASSUM22120), or would be if there were any earnings from that employment (paragraph 8(2)).  Note that this requirement can be met notwithstanding that no income tax is actually paid on the earnings due to reliefs and personal allowances. Prior to 17 July 2013 there was an additional requirement that the general earnings had to be earnings for a tax year in which the employee was ordinarily resident in the UK. This requirement does not apply to SIPs established on or after that date, and may be disapplied for SIP’s established before that date.

In addition, companies may offer participation to eligible employees who are not subject to tax under Section 15 ITEPA in respect of their employment with them but who otherwise meet the eligibility requirements (paragraph 8(5)). 

The eligibility requirements for Schedule 2 SIPs are dealt with at ETASSUM22000.