What does it mean for shares to be withdrawn from a Share Incentive Plan under section 96 ITEPA 2003?

Under section 96, shares are withdrawn from a SIP when trustees transfer them to the participant or another person on their direction, when the participant assigns, charges or otherwise disposes of their beneficial interest in the shares, or when trustees dispose of shares on the participant's direction and account for the proceeds.

Are SIP shares treated as withdrawn if the participant sells their beneficial interest without involving the trustees?

Yes. Section 96 provides that shares are treated as withdrawn from the SIP if the participant assigns, charges or otherwise disposes of their beneficial interest in the shares. This covers dealings with the beneficial interest that do not necessarily involve the plan trustees directly, including using shares as security for a loan.

What happens to SIP withdrawal rules when a participant dies?

Where a participant has died, all references to the participant in the withdrawal rules under section 96 are read as references to the participant's personal representatives. This means executors or administrators dealing with the deceased participant's SIP shares are subject to the same withdrawal provisions that would have applied to the participant.

Are shares withdrawn from a SIP if the trustees sell them and pay the proceeds to the participant?

Yes. Under section 96, shares are treated as withdrawn from the SIP when trustees dispose of them on the participant's direction and account, or stand ready to account, for the proceeds to the participant or another person. A trustee sale followed by payment of proceeds to the participant constitutes a withdrawal from the plan.

Income Tax (Earnings and Pensions) Act 2003 section 96

Meaning of shares being withdrawn from plan

Section 96 defines what it means for shares to be "withdrawn" from a Share Incentive Plan (SIP) for the purposes of the SIP code.

Shares are withdrawn when the trustees transfer them to the participant or another person on the participant's direction.
Shares are withdrawn when the participant assigns, charges or otherwise disposes of their beneficial interest in the shares.
Shares are withdrawn when the trustees dispose of them on the participant's direction and account (or stand ready to account) for the proceeds to the participant or another person.
Where the participant has died, references to the participant are read as references to the participant's personal representatives.

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