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HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

Schedule 2 share incentive plan (SIP): Shares that may be awarded: What amounts to a restriction

Shares are restricted if restrictions have been imposed directly or indirectly by any contract, agreement or condition to which Section 423(2) – (4) ITEPA 2003 would apply. Generally, any restriction that reduces the value of a security will be a restriction. This includes risk of forfeiture, where the disposal will be for less than the market value (Section 423(2)), restrictions on the freedom to retain or dispose of securities, or to exercise rights conferred by the securities (Section 423(3)) and other potential disadvantages in respect of the shares (Section 423(4)).

Paragraph 75(2)(aa)/(3)(aa) states that if the shares awarded under the SIP are subject to any restriction, the Trustees must give the employee notice as soon as practicable after the award of shares giving details of the restriction.