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HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

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HM Revenue & Customs
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Schedule 2 share incentive plan (SIP): Taxation: Partnership Share Money

Any amount of partnership share money paid over to an employee in relation to a Schedule 2 Share Incentive Plan will count as employment income on the individual for the relevant tax year (the year in which the amount is paid over) in the following circumstances (Section 503 ITEPA 2003):

  • deductions in excess of the permitted amounts (paragraph 46(5) Schedule 2 ITEPA 2003), 
  • surplus partnership share money remaining after the acquisition of shares (paragraph 50(5)(b) or 52(6)(b) Schedule 2 ITEPA 2003),
  • partnership share money paid over on an individual ceasing to be in relevant employment (paragraph 52(7) Schedule 2 ITEPA 2003),
  • partnership share money paid over where an accumulation period is brought to an end by an event specified in plan (paragraph 52(8) Schedule 2 ITEPA 2003),
  • partnership share money paid over on withdrawal from partnership share agreement (paragraph 55(3) Schedule 2 ITEPA 2003), or
  • partnership share money paid over where the plan ceases to be a Schedule 2 SIP or on termination of the plan (paragraph 56 Schedule 2 ITEPA 2003).

If an individual who has entered into a partnership share agreement receives any money or moneys worth in respect of the cancellation of the agreement, the amount of the money or the money’s worth counts as employment income of the individual for the tax year in which the money or money’s worth is received. (Section 504 ITEPA 2003).