Income Tax (Earnings and Pensions) Act 2003 section 36

The holding period

Section 36 sets out the rules governing the holding period that applies to free shares awarded under a Share Incentive Plan, including its duration, the restrictions placed on participants during that period, and the circumstances in which those restrictions come to an end.

• When free shares are awarded, the company must specify a holding period of between 3 and 5 years during which the shares must remain with the plan trustees and the participant cannot sell, transfer or otherwise dispose of their beneficial interest in them.
• The holding period must be the same for all shares within a single award, though the company may set different holding periods for different awards made at different times — but it can never retrospectively extend the holding period for shares that have already been awarded.
• The participant's obligations during the holding period are subject to certain exceptions, including where trustees need to accept a takeover offer, where trustees must sell shares to meet PAYE obligations, or where the plan is terminated and shares are removed early with the participant's consent.
• If the participant leaves relevant employment at any point during the holding period, their obligations in respect of that period automatically come to an end.