Income Tax (Earnings and Pensions) Act 2003 section 41

Performance allowances: method one [ITEPA 2003 Sch 2 para 41]

Section 41 sets out the first method by which a Share Incentive Plan (SIP) may incorporate performance allowances when awarding free shares to employees.

• At least 20% of the shares in any award must be distributed without reference to performance, on the same terms for all eligible employees, and this portion is treated as a separate free share award.
• The remaining shares (up to 80%) must be awarded by reference to performance criteria.
• The highest number of performance-related shares awarded to any individual must not exceed four times the highest number of non-performance shares awarded to any individual.
• Where free shares of different classes are awarded, these requirements apply separately to each class of shares.