Income Tax (Earnings and Pensions) Act 2003 Schedule 2 paragraph 7

The purpose of the plan

Schedule 2 paragraph 7 sets out the fundamental purpose of a share incentive plan and the restrictions on what benefits the plan may provide to employees.

• The sole purpose of the plan must be to provide benefits to employees in the form of company shares, giving them a continuing stake in the company.
• The plan must not provide any benefits to employees other than in accordance with Schedule 2 — for example, it must not offer cash as an alternative to shares.
• However, an employee is not prevented from receiving a normal shareholder benefit from the company simply because the shares are held on their behalf under the plan.
• The exception applies where the employee would have received exactly the same benefit had they acquired the shares independently, outside of the plan.