Income Tax (Trading and Other Income) Act 2005

Approved share incentive plan distributions

770 Amounts applied by SIP trustees acquiring dividend shares or retained for reinvestment

(1) This section applies if—

(a) shares are awarded to a participant under an approved share incentive plan, and

(b) the condition in section 392(3) or (5) is met at the time the shares in question are so awarded (earnings within ITEPA 2003).

This is subject to subsection (4).

(2) No liability to income tax arises for the participant in respect of—

(a) the amount applied by the trustees in acquiring dividend shares on behalf of the participant, or

(b) any amount retained under paragraph 68(2) of Schedule 2 to ITEPA 2003 (amount of cash dividend not reinvested).

(3) Subsection (2) does not affect any liability arising as a result of—

(a) the retained amount later being paid out (see sections 393 and 406), or

(b) the dividend shares ceasing to be subject to the plan (see sections 394 and 407).

(4) This section does not apply if the main purpose or one of the main purposes of the arrangements under which the shares are awarded or acquired is the avoidance of tax or national insurance contributions.

(5) This section forms part of the SIP code (see section 488 of ITEPA 2003: approved share incentive plans).

(6) Accordingly, expressions used in this section and contained in the index in paragraph 100 of Schedule 2 to that Act (approved share incentive plans) have the meaning indicated by that index.

(7) In particular—

(a) for the meaning of “dividend shares” see paragraph 62(3)(b) of that Schedule,

(b) for the meaning of “participant” see paragraph 5(4) of that Schedule, and

(c) for the meaning of “the trustees” see paragraphs 2(2) and 71(1) of that Schedule.