Income Tax (Earnings and Pensions) Act 2003 section 488

Share incentive plans (SIPs)

Section 488 introduces the rules governing Share Incentive Plans (SIPs), setting out the scope of the tax treatment, key definitions, and the components of what is collectively known as the SIP code.

• A Share Incentive Plan (SIP) is a company plan that either gives shares to employees for free ("free shares") or allows shares to be bought from salary deductions ("partnership shares"), with tax exemptions available where the plan qualifies as a Schedule 2 SIP
• Certain amounts connected with SIPs may be treated as employment income and subject to PAYE deductions under the relevant regulations
• The "SIP code" comprises the rules in this chapter, Schedule 2 to the Act, and the provisions referred to in section 515 dealing with tax advantages and charges under other legislation
• Key definitions and an index of terms used throughout the SIP code are provided in this section and at the end of Schedule 2