Income Tax (Earnings and Pensions) Act 2003 section 42

Performance allowances: method two

Section 42 sets out the requirements that must be met when a Share Incentive Plan uses method two for allocating free shares based on performance allowances.

• Some or all of the shares in an award must be allocated by reference to performance, and shares awarded to qualifying employees within the same performance unit must comply with the same-terms participation requirement in paragraph 9.
• Performance targets must be "consistent targets", meaning that when they are set they can reasonably be viewed as comparable in terms of the likelihood of being met by the performance units to which they apply.
• For the purposes of checking compliance with the same-terms requirement, the free shares awarded in respect of each performance unit are treated as a separate award of free shares.
• Where this method is used, there is no requirement under paragraph 9 for awards to members of different performance units to be made on the same terms.