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HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

HM Revenue & Customs
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Schedule 2 share incentive plan (SIP): General requirements: No further conditions

A Schedule 2 SIP must not include any conditions on participation in awards of shares other than those required or authorised by Schedule 2 (paragraph 11). Unauthorised conditions will often (but not always) conflict with the eligibility requirements of Part 3 Schedule 2 (see ETASSUM22000).


  • a rule (whether of the plan or not) which would prevent an employee from participating in an award of free shares if s/he had received a cash bonus or other benefit.
  • a condition attaching to participation in a particular award, is that employees must not have participated previously in the Schedule 2 SIP. Although there are monetary limits on the extent to which individuals may take part in a Schedule 2 SIP in a tax year, previous participation is not grounds under Schedule 2 for excluding an individual from further participation.
  • a company has recently acquired a new subsidiary by means of a takeover. It proposes to award 100 free shares to all employees of the new subsidiary to welcome them to the group.  In order to participate in the award employees must, therefore, have been employed by the subsidiary at the date of its transfer into the group. This would be an unauthorised condition on participation in the award because the company’s own employees would be excluded along with those employed by any other participating subsidiary company. See ETASSUM21120 regarding the selection of constituent companies.