Income Tax (Earnings and Pensions) Act 2003 section 506

Charge on partnership shares ceasing to be subject to plan

Section 506 sets out the income tax charge that arises when partnership shares leave a Share Incentive Plan (SIP), with the amount of the charge depending on how long the shares have been held in the plan.

• If partnership shares leave the plan within 3 years of acquisition, the full market value of the shares at the exit date is charged as employment income, unless the shares were required to be offered for sale, in which case the charge is the lower of the original cost and the market value when offered for sale.
• If partnership shares leave the plan after 3 years but before 5 years, the charge is the lower of the original partnership share money used to acquire them and the market value at the exit date (or at the time offered for sale, if applicable).
• If partnership shares have been held in the plan for 5 years or more, no income tax charge arises under this section.
• Any tax already paid on capital receipts in respect of the shares, or under the provisions dealing with internationally mobile employees, is deducted from the tax due.