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HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

Schedule 2 share incentive plan (SIP): Taxation: Disadvantages

Buying partnership shares under a Schedule 2 Share Incentive Plan may effect an employee’s entitlement to contribution based, earnings-related and means-tested state benefits, tax credits and work-related payments.

A participant in a Schedule 2 SIP will not have paid NICs on the pay that has been used to buy partnership shares. As a result, they may not have paid sufficient NICs to qualify for certain state benefits. This is likely to affect only a small number of people. Information contained in “IR177 – Share Incentive Plan and your entitlement to benefits” explains this in more detail and can be accessed via the following website address: -