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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): Requirements relating to the trust and trustees of a Schedule 2 SIP: Trustees' optional powers

Under the SIP Code, the trust deed may allow the trustees various powers. The following examples are expressly mentioned in Part 9 of Schedule 2:

Power to borrow

The trustees may be permitted to borrow:

  1. to acquire shares to be used as Schedule 2 SIP shares, and
  2. for other purposes as specified in the trust deed (paragraph 76).

The deed may require the amount and terms of any borrowing to be agreed with the company or it may leave this to the trustees’ discretion – this is a matter for the parties to decide.

Power to raise funds to subscribe for shares under rights issues

Subject to the duty to act in accordance with a participant’s directions under paragraph 72(1) (see ETASSUM26110), the trust deed can permit the trustees to dispose of some of the rights arising under a rights issue in order to obtain sufficient funds to exercise the rest of the rights (paragraph 77(1)). This practice is known as tail swallowing and ETASSUM25140, ETASSUM25150 & ETASSUM25160 provide further information.