Income Tax (Earnings and Pensions) Act 2003 section 67

Holding period for dividend shares

Section 67 establishes that the holding period rules that apply to free shares also apply to dividend shares, but with a fixed holding period of 3 years.

• Dividend shares are subject to the same holding period rules as free shares, as set out in paragraphs 36 and 37 of Schedule 2.
• The holding period for dividend shares is fixed at 3 years — unlike free shares, where the plan may specify a period between 3 and 5 years.
• During the 3-year holding period, dividend shares must generally be held in the plan trust and cannot be withdrawn without tax consequences.
• If an employee withdraws dividend shares before the end of the 3-year holding period, income tax will be charged on the value of those shares at the time of withdrawal.