Income Tax (Earnings and Pensions) Act 2003 section 81F–81I

Enquiries into Share Incentive Plans

Sections 81F to 81I set out the rules governing HMRC enquiries into Share Incentive Plans (SIPs), including the timeframes for opening enquiries, how they are concluded, and the consequences — both for serious and less serious non-compliance — that may follow.

• HMRC may open an enquiry into a SIP within prescribed time limits, or at any time if they have reasonable grounds to believe the plan's requirements are not or have not been met, even if the plan has already been terminated.
• An enquiry is completed by a closure notice, which states whether serious non-compliance (paragraph 81H), less serious non-compliance (paragraph 81I), or no non-compliance has been found; companies may apply to the tribunal to require HMRC to issue a closure notice within a specified period.
• For serious non-compliance, the plan loses its Schedule 2 SIP tax-advantaged status from a specified time and the company faces a penalty of up to twice HMRC's reasonable estimate of the total income tax and National Insurance contributions that went unpaid as a result of the plan's favourable status.
• For less serious non-compliance, the company faces a penalty of up to £5,000 and must remedy the failures within 90 days; failure to do so results in a default notice, loss of Schedule 2 status, and a further penalty of up to twice the estimated unpaid tax and National Insurance contributions.