Income Tax (Earnings and Pensions) Act 2003 section 510

Payments by trustees to employer company on shares ceasing to be subject to plan

Section 510 deals with the obligation on SIP trustees to pay sums to the employer company to cover PAYE liabilities when shares cease to be subject to a Schedule 2 Share Incentive Plan and become taxable employment income of the participant.

• When shares leave a Schedule 2 SIP and give rise to taxable employment income with a PAYE obligation, the trustees must pay the employer company enough to meet that PAYE liability, unless the plan already requires the participant to do so.
• The employer company must deduct income tax from the sums it receives (whether from the trustees or the participant) and pay any remaining balance to the participant.
• The employer company is the company that employs (or last employed) the participant in relevant employment at the time the shares cease to be subject to the plan, provided that company is subject to PAYE regulations at that time.
• This obligation on the trustees is also subject to section 511, which provides for the trustees themselves to make PAYE deductions in certain circumstances when shares cease to be subject to the plan.