COVID-19 update: Even as COVID-19 restrictions begin to ease, we continue to utilise technology in delivering our services and communicating with you, without interruption. Read our COVID-19 Statement and latest up-dates. Contact us.

Share Incentive Plans (SIPs)

Share Incentive Plans (SIPs)

A SIP is UK tax-advantaged “all employee” plan available to listed companies and to independent private companies (ie, those not under the control of another company).

Tax Advantaged Plans, Share Plans, Employee Incentive Plans, Employee Services

FIND OUT MORE BELOW >FIND OUT MORE BELOW >FIND OUT MORE BELOW >FIND OUT MORE BELOW >FIND OUT MORE BELOW >FIND OUT MORE BELOW >
The typical Trustee and Administration service provider of employee incentive plans is not involved in the entire process from setup to on-going administration and after-care (e.g. training). We are, and this is what makes our approach different. Providing a one-stop solution from start to finish. 

What is a Share Incentive Plan (SIP)? 

A SIP is UK tax-advantaged “all employee” plan available to listed companies and to independent private companies (ie, those not under the control of another company). All qualifying employees and directors must be permitted to take part in a SIP on similar terms, though no employee is obliged to participate. 

How does an SIP work and what are the award options?

Under the plan the employer can make up to three different types of award to each participant each year: 

  • “Free Shares”: the employee receives shares free of charge with a market value of up to £3,600 at the time of the award.
  • “Partnership Shares”: the employee is permitted to pay up to £1,800 out of his pre-tax earnings to buy shares (in other words, the salary or bonus that he gives up in order to make the payment is not subject to PAYE or National Insurance contributions (NIC)).
  • “Matching Shares”: the employer is permitted to offer the employee an incentive to invest in Partnership Shares by the offer of up to 2 additional free shares for every Partnership share purchased as above. 

If any dividends are declared on any of the above shares while they remain in the Plan, those dividends can be either paid out in cash to the employee or reinvested (free of tax) in further “Dividend Shares” in the Plan. 

The employer can choose to offer only Free Shares, or only Partnership Shares, or only Partnership and Matching Shares, or any combination of these awards, on any one occasion and can vary the selection offered from year to year. 

So the maximum value of shares that an employee may receive each year from an employer who wishes to provide the greatest possible benefit, is £3,600 (in Free Shares) plus £1,800 (in Partnership Shares) and a further £3,600 (in Matching Shares), ie a total of £9,000, plus the value of any reinvested dividends. 

However, in practice, the majority of employers providing SIPs wish to concentrate the value of shares awarded on those employees who most readily appreciate the value of the offer and who are prepared to invest some of their earnings in order to do so. For that reason, the most common offering is of Partnership and Matching Shares. 

The Shares awarded under a SIP are held by trustees of a dedicated UK resident employee benefit trust which must be created for the purpose of the Plan. 

Free Shares must be offered to employees on “similar terms”, ie they can be awarded on a basis which is proportionate to each participant’s rate of pay and/or length of service and/ or hours worked, but the amount offered cannot be varied by reference to other factors.

The employer is permitted to attach further conditions to Free Shares and Matching Shares: 

  • The employee may be required to retain them in the Plan for a “holding period” of 3 to 5 years; 
  • An employee who leaves within a set period which may be up to 3 years may forfeit the shares for no payment; 
  • The shares may be forfeited if performance conditions for the business (or for the part of the business in which the employee works) are not met.

The main conditions for SIP tax relief are as follows: 

This is a brief summary and should not be relied on alone. 

  • The company whose shares are used must either be listed or not under the control of another company;
  • The plan must be registered with HMRC;
  • The employer must make annual online returns to HMRC of all relevant events in the plan. 

Advantages for the employees: 

  • No income tax or NIC liability arises on an award of Free or Matching Shares;
  • The earnings given up by the employee to buy Partnership Shares is not subject to tax or NIC; 
  • Provided all shares remain within the Plan for at least 5 years, or, if earlier, until the employee leaves for a “good” reason (injury, disability, redundancy, retirement, etc), no income tax or NIC liability arises when the shares leave the plan;
  • If the employee removes shares from the plan within the first 3 years of the award (and does not forfeit them), income tax and NIC are due on the value of the shares at the time they are taken out;
  • If the employee removes the shares from the plan between 3 and 5 years after the award (and does not forfeit them), income tax and NIC are due on the lower of their market value at the date of the award and their market value at the time they are taken out of the plan;
  • No income tax is charged on dividends which are reinvested in Dividend Shares;
  • The base cost of the shares for capital gains tax purposes is the value of the shares at the time they are removed from the plan, so that all growth in value of the shares held in the Plan is outside the scope of capital gains tax for so long as the Plan continues to qualify;
  • HMRC will agree a valuation of the shares in advance of any SIP award so that the employer and employee can have certainty on the tax treatment. 

Advantages for the employer: 

  • On awards of Shares under a SIP, the company will normally benefit from a deduction from its profits for the value of the shares in question in calculating its corporation tax liability, even though the company may not necessarily incur any cash cost in providing the benefit (where, for example, the shares are issued to the SIP trust which pays the subscription cost to the company).
  • The employer is entitled to a deduction for corporation tax for the costs of setting up the scheme. 

Our online share plan platform allows for the easy administration of a large range of employee plans including: LTIPs, EMIs, CSOPs, SIPs & SAYE plans.

Key features of our online share plan platform

Web enabled icon of browser windows

Web enabled, 24/7 access to all plan information for company stakeholders

clock icon

Information updated in real-time

magnifying glass and people icon

Ability to view and filter all participants 

stocks and graphic on computer icon

Access to suite of pre arranged, Business Intelligence reporting

hand holding data icon

Complete management oversight and control for company

person pointing at browser icon

Ability to create and schedule your own reporting 

"Fiduchi's Online Share Plan Administration portal, has saved time, money and paper, and [it] allows us to become more efficient in the managing of our employees share awards. It's really fantastic what an impact this platform has made."

Micheal S
Head of People - Tech startup company.

Professional man sat at computer looking at viewer
3 people standing icon

Easy Onboarding

Onboarding of your data to our online platform is easy regardless if you choose a fully-managed or self-service in-house solution. By making the switch to our platform, you can upgrade from having to manage your share plan data on complicated spreadsheets. Plus to make the process as simple as possible, our experts will guide you every step of the way and we also provide helpful guides.

Person pointing to globe icon

Global Compliance

For businesses who opt for our fully managed solution, our platform is able to deal with each business's unique requirements. When it comes to dealing with exact legal and regulatory issues, our platform will be able to automatically determine the actions required for each award or vesting, specific to the country in which the company operates. Therefore minimising the risks and allowing full compliance from a legal and regulatory position.

Data security Icon with Padlock

Data Security

Our platform uses the highest standards to protect the valuable data and assets we hold on behalf of our clients. We have a team of in-house cyber security and IT professionals to protect our system and carry out security audits, due diligence, penetration testing and to oversee potential threats. We are fully regulated, accredited and certified by a range of statutory and non-statutory bodies including the US Department of Commerce’s Privacy Shield.

Computer icon

Branded User Portal

Our platform can be branded to match your company's own brand, therefore becoming a professional extension of your employee benefits. You can set role-based access and let your employees and shareholders log into their own online branded share platform anytime, anywhere and see exactly what shares they have and how much they are worth. They can also easily accept grants, exercise options, calculate potential payouts and more.

Find out more - Call us >

Seeking further advice?
Contact one of our professionals below:

Testimonials

"THANK YOU TO OUR GUARDIANS!

I would like to extend a BIG thank you to the Fiduchi team for taking such good care of me and my business. It's reassuring to know that there are some guardian angels out there to look after us."

Founder & CEO - SUPERLUXE Events

"Thank you very much for your professional assistance (and patience) in helping us transfer our shares and assets into the new Trust. I know that it has taken longer than expected. Still, your professionalism and continued support have helped us achieve the desired outcome."

Chairman and CEO

"My sincere thanks for the assistance you have provided the advisory committee by coordinating directly with the charity to formalise an agreed donation plan."

Private Client (Charity)

"Many, many thanks for your hard work and speed at setting up our client's Private Investment Company in just 24hrs! Your flexibility and communication throughout the whole process have been appreciated, and the feedback has been tremendous......

Thank you."

Major UK Law Firm

"Thank you, everyone, for delivering this significant re-structure to our family assets and within a very tight timeframe.

Great to get this finalised!"

Mr. C - Private Client

"THANK YOU TO OUR GUARDIANS!

I would like to extend a BIG thank you to the Fiduchi team for taking such good care of me and my business. It's reassuring to know that there are some guardian angels out there to look after us."

Founder & CEO - SUPERLUXE Events

"We consider Fiduchi an important strategic partner of ours. Over the years they have proven themselves to be professional and extremely thorough. Combined with this professionalism, they are always a pleasure to deal with and we are pleased with their service levels."

Mr. P.E, Managing Director, W Ltd.

"We consider Fiduchi an important strategic partner of ours. Over the years they have proven themselves to be professional and extremely thorough. Combined with this professionalism, they are always a pleasure to deal with and we are pleased with their service levels."

Mr. P.E, Managing Director, W Ltd.

“I am very impressed with the professionalism and efficiency Fiduchi Limited demonstrated during the establishment of our employee benefit trust. They coordinated the process seamlessly and provided us with valuable advice and guidance to ensure compliance with our regulatory and legal responsibilities. Throughout my engagement with the team, I have found them to be approachable and easy to work with.”

Mr. P.B. FE Ltd.

"Thank you for helping us with the establishment of our real estate fund."

Startup Fund Manager

"Thank you so much for helping my client register their vessel with the Red Ensign Group and all the other advice and support you provided!"

Trusted advisor to Yacht Owner.

"Fiduchi's yacht team provides a first-class service! In particular with assisting us with our crew banking requirements and payroll services. Whenever we need assistance, they are just a phone call away!"

Superyacht Captain

Meet all of the Private Client team

Meet the Employee Services team

Meet all of the dedicated Yachts team

Meet the Funds team

Meet all of the Corporate team

Relevant video(s)

Employee Incentive Plans in the Middle East

Fiduchi's Regional Director - Middle East Christopher Dungan interviews our leading expert Martin Benson on the types of employee incentive schemes available for Middle East employers. In this webinar, Christopher starts by talking about the commonly well known International Savings Plans (ISPs), which have replaced end of service gratuity schemes in the region. Martin goes on to further expand on new types of plans which should also be considered by employers looking to incentivise their employees by offering shares in the business. How this can be done, what needs to be considered, and how employers and family-owned businesses can still retain a level of control. Options available for managing the administration of the employee incentive plans which allow complete online access and how plans can be tailored to each employers requirements.

Date posted:
September 4, 2020
Business area:
Employee

Relevant article(s)

Relevant literature

White Triangle

Want to know more about our Private Wealth services?

Our experienced Private Wealth and Family Office teams are here to answer any questions you may have. With a wealth of knowledge and expertise, they will be able to advise you on right solutions to meet your needs. You can rest assured that core to the Fiduchi principles are how your interests should best be met.

Call our Private Wealth team on: +44 1534 755155

Alternatively, you can message them directly below:
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
White Triangle

Want to know more about our Corporate services?

Our experienced Corporate team are here to answer any questions you may have. With a wealth of knowledge and expertise, they will be able to advise you on right solutions to meet your needs. You can rest assured that core to the Fiduchi principles are how your interests should best be met.

Call our Corporate team on: +44 1534 755155

Alternatively, you can message them directly below:
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
White Triangle

Want to know more about our Fund services?

Our experienced Funds team are here to answer any questions you may have. With a wealth of knowledge and expertise, they will be able to advise you on right solutions to meet your needs. You can rest assured that core to the Fiduchi principles are how your interests should best be met.

Call our Funds team on: +44 1534 755155

Alternatively, you can message them directly below:
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
White Triangle

Want to know more about our Yacht services?

Our experienced yacht team are here to answer any questions you may have. With a wealth of knowledge and expertise, they will be able to advise you on right solutions to meet your needs. You can rest assured that core to the Fiduchi principles are how your interests should best be met.

Call our Yachts team on: +44 1534 755155

Alternatively, you can message them directly below:
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
White Triangle

Find out how we can help with your employee incentive plan below

Our experienced employee services team are here to answer any questions you may have regarding all types of employee incentive plans. With a wealth of knowledge and expertise, they will be able to advise you on the best solution that meets your business needs.  

You can telephone our employee incentives team on: +44 7797 831 648 or +44 7415 918 046

Alternatively, you can sen them a message directly below:
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.