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

SIPs: free shares and partnership shares

Schedule 2 paragraph 2 defines what a Share Incentive Plan (SIP) is and establishes key terminology used throughout the SIP code.

• A SIP is a plan established by a company to provide shares to employees either free of charge or through salary deductions.
• Shares given to employees at no cost are called "free shares"; shares bought from salary deductions are called "partnership shares".
• Key defined terms include "the company" (the entity that set up the plan), "plan requirements" (the rules that apply to the plan), and "the trustees" (the body administering the plan).
• The trustees are established under Part 9 of the Schedule specifically to carry out functions connected with the plan.