Share Incentive Plan (SIP)

The SIP is the newest of the Inland Revenue tax efficient all employee share plans. The principal features of the Plan (each element can be used separately) are:-

• Partnership Shares - An employee may purchase a maximum of £125 a month of company shares out of pre-tax salary. If the shares are held for five years and the employee remains with the company they are completely tax free. If they are held for three years the employee pays tax on the lower of the purchase price and the market value when they are withdrawn from the Plan.
• Matching Shares - The company may provide a maximum of 2 matching shares for each partnership share. The company can impose forfeiture provisions on the matching shares if the employee leaves the company within three years or sells the underlying partnership shares. If the shares are held for five years and the employee remains with the company they are completely tax free. If they are held for three years the employee pays tax on the lower of the market values at the date of award and the date they are withdrawn from the Plan.
• Free Shares - The company may award free shares to employees which may be based upon their performance. The maximum value of free shares that can be awarded in any year is £3,000. The taxation of free shares is the same as for matching shares.
• Dividend Shares - These are shares acquired with dividends paid on the other forms of Plan shares. Dividend shares are tax free after they have been held in the Plan for three years.
• The Plan has various rules on cessation of employment. If an employee leaves because of injury, disability, redundancy, retirement, death, TUPE transfer or sale of part of the business all Plan shares are released tax free.

If any shares are issued under this Plan it will require shareholder approval.