Income Tax (Earnings and Pensions) Act 2003 Schedule 2 paragraph 19

The "no material interest" requirement

Paragraph 19 of Schedule 2 sets out the requirement that a participant in a Share Incentive Plan (SIP) must not have a material interest in the company whose shares are used in the plan.

• An employee is not eligible to participate in a SIP if they have, or have had within the preceding twelve months, a material interest in the company whose shares are the subject of the plan.
• A material interest generally means beneficial ownership of, or the ability to control, more than 25% of the ordinary share capital of the company.
• The material interest test also applies to the shares of a parent company where the SIP shares are in a subsidiary company.
• When assessing whether an employee has a material interest, shares or rights held by certain associates — such as spouses, civil partners, children and business partners — are taken into account alongside the employee's own holdings.