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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): Eligibility: The employment requirement

The plan rules must ensure that participants are employees of the establishing company or, if it is a group plan, of a constituent company (see ETASSUM20120). 

Paragraph 14 states that for all awards the employment requirement must be met at the appropriate time (see ETASSUM22110), which in the case of partnership and matching share awards will normally precede the date of award. It is possible therefore, that the participant will have left employment before the award can be made. This situation is dealt with at paragraph 97(2). 

The paragraph 97(2) provision applies if the employee leaves in the “acquisition period”, which means the period from the end of the accumulation period (if there was an accumulation period) to the day immediately preceding the acquisition date (see ETASSUM24360), inclusive, or (if there was no accumulation period) the period beginning with the deduction of partnership share money and ending with the acquisition date.

In these circumstances the participant is entitled to receive an award of shares as if he were still in relevant employment and, for this purpose only, his shares are treated as ceasing to be subject to the plan (see ETASSUM28150) on the date of leaving i.e. the employee is treated as leaving employment immediately after the shares are awarded.

For the meaning of ‘employee’, ‘employment’ etc. see ETASSUM28200. For the purpose of the employment requirement in SIP, the terms of employment (such as whether the employment is temporary or of fixed duration; full or part-time etc) cannot be used to determine whether the employment requirement is met.