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HMRC internal manual

Stamp Taxes on Shares Manual

Companies and shareholders: employee Share Incentive Plans

Some companies operate a share incentive plan (‘SIP’) under which employees may be entitled to receive shares in the company, either free or paid for out of sums deducted from their salary. Where the plan is granted approved status by HMRC, it will benefit from tax and NIC advantages. For details of the conditions of approval, see http://www.hmrc.gov.uk/shareschemes/sip_employers.htm

Approved SIPs may provide for one or a combination of the following:

  1. free shares: employers may give employees free shares in the company worth up to £3,000 per year
  2. partnership shares: employees may buy shares worth up to £1,500 per year out of untaxed earnings
  3. matching shares: where employees buy partnership shares, employers may give them ‘matching’ shares up to a ratio of 2:1
  4. dividend shares: dividends received from plan shares worth up to £1,500 per year may be reinvested by employees to buy further company shares.

A purchase of either partnership shares or dividend shares would prima facie be chargeable to SDRT, as a transfer of chargeable securities for consideration in money or money’s worth (FA86/S87). However, transfers within approved SIPs are exempt from stamp duty and SDRT: see STSM042010.