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Share incentive plan definition

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What does Share incentive plan mean?

Share Incentive Plans (SIPs) are HMRC approved share plans and tax advantaged plans. In general terms, a SIP must be open to all UK resident employees of relevant companies. However, other employees may also be invited to participate. The shares awarded under a SIP are held in a trust and provided they are held for at least five years, the SIP is tax-efficient for both the employer and the employees. The SIP enables an employee to receive shares in his employer company in a variety of different ways. The first type are 鈥淔ree Shares鈥 which, in certain circumstances, can be given to the employee at no cost with no income tax or NIC consequences. The SIP also enables employees to purchase new shares in their employer company and, at the same time, obtain income on the purchase. Shares purchased in this way under a SIP are known as 鈥淧artnership Shares鈥. If an employee purchases partnership shares under a SIP, he may be entitled to receive additional free shares. These extra free shares are known as 鈥淢atching Shares鈥. Finally,

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