SIP—corporate events and rollover

A share incentive plan (SIP) gives employees the opportunity to acquire shares in their employer or a parent company of the employer on a tax-efficient basis.

As SIPs are designed to be offered to all employees (rather than on a selective basis), they tend to be operated by larger listed companies.

If the statutory provisions are met and the SIP is correctly notified to HMRC, favourable tax treatment can result.

This subtopic looks at the impact of capital reorganisations, takeovers and demergers on awards made under an SIP. The impact is generally more complex than pursuant to other tax-advantaged plans as participants hold shares (through the SIP trustees) rather than options over shares

.For further details on the impact of company reconstructions, takeovers, demergers and rights issues on awards made under an SIP, see Practice Note: Share incentive plans-corporate events.

Law governing SIPs

The SIP gives employees the opportunity to acquire shares in their employer or a parent company of the employer on a tax-efficient basis. The legislative framework governing the SIP is mostly contained in:

•
Schedule 2 to the Income tax (Earnings and Pensions)

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