Background
2003.This Chapter, together with Schedule 2, derives from the legislation relating to share incentive plans (or “SIPs” for short). SIPs were previously known as employee share ownership plans (or “ESOPs” for short). The SIPs legislation is the result of a policy designed to bring share ownership in a company to the whole of that company's workforce.
2004.Nearly all the SIPs legislation is contained in Schedule 8 to FA 2000 (introduced by section 47 of that Act). Schedule 8 to FA 2000 was amended, to a certain extent, by Schedule 13 to FA 2001 (introduced by section 61 of that Act), and also by section 95 of that Act. Further amendments to Schedule 8 of FA 2000 were made by section 39 of FA 2002 and also by the Employee Share Schemes Act 2002.
2005.The new legislation relating to SIPs, the majority of which is contained in this Chapter and Schedule 2, is called “the SIP code”: a term introduced in section 488.
2006.The core of the SIP code is that a company establishing a share incentive plan must offer either “free shares” or “partnership shares” (or both) to its employees. Two other types of shares - “matching shares” and “dividend shares” - are dealt with in the SIP code; and either or both of these may also be offered to employees - although this is not essential. And if a SIP is to be “approved” for the purposes of the legislation (and thus obtain the tax advantages available to an approved SIP), there are general requirements to be met, and also further requirements relating to the eligibility of individuals, to the types of shares that may be awarded, and to the trustees.
2007.The SIP code, accordingly, has a number of distinguishable components:
it specifies requirements that a SIP must meet before it may be “approved” for the purposes of the SIP code;
it deals with the procedural aspects relating to the approval of plans and the withdrawal of approval;
it specifies the tax advantages that an approved SIP possesses;
it specifies the tax charges that may arise in certain circumstances (for example, when shares cease to be subject to the plan); and
it deals with supplementary matters (including interpretation).
2008.Of the components listed in the last paragraph, this Chapter deals with the tax advantages that an approved SIP possesses, and with the tax charges that may arise.
2009.Schedule 2 deals with the other components listed in that paragraph. After the introduction (in Part 1), that Schedule deals with the requirements that a SIP must meet before it may be “approved” for the purposes of the SIP code (in Parts 2 to 9); with the approval of plans and the withdrawal of approval (in Part 10); and with supplementary matters (in Part 11).
2010.Schedule 8 to FA 2000 also contained other provisions relating to corporation tax, capital gains tax and stamp duty. These other provisions are dealt with in Schedule 6 to this Act (consequential amendments). Schedule 7 to this Act includes provisions designed to avoid any transitional problems arising from the replacement of Schedule 8 by the provisions contained in this Act.
