Income Tax (Earnings and Pensions) Act 2003 section 503

Charge on partnership share money paid over to employee

Section 503 imposes an income tax charge when partnership share money from a Share Incentive Plan (SIP) is paid back to an employee in various specified circumstances.

• When partnership share money is returned to an employee under any of the specified SIP provisions, it is taxed as employment income in the tax year the payment is made.
• The circumstances triggering the charge include excess salary deductions beyond the permitted maximum, surplus money left over after shares have been purchased, and money returned when an employee leaves their job.
• The charge also applies when partnership share money is paid back because the accumulation period ends early due to a plan-specified event, or because the employee withdraws from the partnership share agreement.
• If the SIP loses its tax-advantaged status or the plan is terminated altogether, any partnership share money returned to the employee is likewise taxable as employment income.