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Finance Act 2014

Section 49: Share Incentive Plans: Increases in Maximum Annual Awards EtcSection 50: Share Incentive Plans: Power to Adjust Maximum Annual Awards Etc

Summary

1.Section 49 increases the maximum value of the shares that can be awarded or purchased each year under the Share Incentive Plan (SIP) tax advantaged employee share scheme. Section 50 enables future changes to SIP limits to be made by Treasury Order.

Details of the Sections

Section 49: Share Incentive Plans: Increase in Maximum Annual Awards Etc

2.Subsections (1) to (4) amend Schedule 2 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) to increase the maximum value of the SIP free shares that can be awarded to an employee each year from £3,000 to £3,600; and the maximum amount of an employee’s salary that can be used to purchase SIP partnership shares each year from £1,500 to £1,800. These changes took effect from 6 April 2014.

Section 50: Share Incentive Plans: Power to Adjust Maximum Annual Awards Etc

3.Subsections (1) to (4) amend Schedule 2 of ITEPA to allow future changes to SIP annual limits to be made by Treasury Order. This new power applies to the maximum value of SIP free shares that can be awarded to an employee (as set out in paragraph 35 Schedule 2), the maximum amount of an employee’s salary that can be used to purchase SIP partnership shares (paragraph 46) and the maximum ratio of matching shares to partnership shares (paragraph 60). This change took effect from the date the Finance Bill 2014 received Royal Assent.

Background Note

4.SIPs are tax advantaged 'all employee' share schemes, which enable employees to acquire shares in various ways, up to maximum values specified in legislation. SIP features may include the purchase of 'partnership shares' by employees by deduction from salary, or the award of 'free shares' or 'matching shares' by employers.

5.This increase in SIP limits reflects the Government's support for employee share ownership.

6.Alongside this measure, the Government also proposes to increase the maximum amount an employee can contribute to savings arrangements linked to tax advantaged Save As You Earn share option schemes. That change was implemented by Treasury Order and took effect from 6 April 2014.

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