Income Tax (Earnings and Pensions) Act 2003 Schedule 2 paragraph 1

Introduction to Schedule 2 share incentive plans (SIPs)

Paragraph 1 of Schedule 2 defines what a Schedule 2 share incentive plan (SIP) is and sets out the framework of requirements that must be met for a plan to qualify for the associated tax advantages.

• A share incentive plan qualifies as a Schedule 2 SIP only if it meets the requirements set out in Parts 2 to 9 of the Schedule, covering areas such as eligibility, types of shares, free shares, partnership shares, matching shares, dividends, and trustees.
• The company must notify HMRC of the plan before it can be treated as a Schedule 2 SIP; once notice is given, the plan is treated as qualifying.
• HMRC has the power to enquire into a plan and, if appropriate, decide that the plan should not be a Schedule 2 SIP.
• Certain disqualifying events, set out in Part 10A of the Schedule, can also cause a plan to lose its Schedule 2 SIP status.

---