Can an employee withdraw from a partnership share agreement at any time under section 55 ITEPA 2003?

Yes. Under section 55 of ITEPA 2003, a share incentive plan must include a provision allowing any employee to withdraw from a partnership share agreement at any time. The employee exercises this right by giving written notice to the company, with no restriction on when the right may be used.

When does withdrawal from a partnership share agreement take effect?

Unless the employee specifies a later date in their written notice, the withdrawal takes effect 30 days after the company receives the notice. The employee may choose a longer notice period but cannot make the withdrawal effective sooner than 30 days from the date of receipt by the company.

What happens to partnership share money when an employee withdraws from the agreement?

Once the employee has withdrawn, any partnership share money held on their behalf — that is, salary deductions not yet used to acquire shares — must be paid back to them as soon as practicable. The plan cannot retain these funds after the employee has formally withdrawn from the partnership share agreement.

Does the notice of withdrawal from a partnership share agreement need to be in writing?

Yes. Section 55 of ITEPA 2003 requires that all notices of withdrawal from a partnership share agreement must be given in writing to the company. An oral or informal notification would not satisfy this requirement. The written notice triggers the 30-day period before withdrawal takes effect.

Income Tax (Earnings and Pensions) Act 2003 section 55

Withdrawal from partnership share agreement

Section 55 sets out the rules governing how an employee may withdraw from a partnership share agreement and what happens to any funds held on their behalf when they do so.

An employee may withdraw from a partnership share agreement at any time by giving written notice to the company.
Unless a later date is specified in the notice, the withdrawal takes effect 30 days after the company receives it.
Any partnership share money held on the employee's behalf must be paid over to them as soon as practicable after withdrawal.
All notices of withdrawal must be in writing.

Access full legislation.And much more.

By becoming a member, your team gets full access to Tax World research tools and source-backed tax resources.

Become a member