The Share Incentive Plan (SIP) is a government backed tax efficient share scheme which has been around since the beginning of the century, and in a somewhat different form since the 1970’s. It has been widely used by larger quoted companies but it was often seen as too complicated to be used much by unquoted companies. This is a pity, as it can offer employees in unquoted companies very generous reliefs. Not only can an employee receive shares in their employer tax free, and later sell them tax free, it is also possible for an employee to buy shares and benefit from tax relief on the cost of purchase.
There are rules of course. SIPs have to be offered broadly to all employees and there are limits on how much each individual can receive each year, but from an employers point of view they can be a valuable tool with recruitment and retention. They are not going to be suitable for everyone but in the last couple of years some of the detailed rules have been relaxed to make the scheme more attractive for unquoted companies, so it may now be worth having a look at SIPs to see if they can help with your business.
This is a guest post written by William Franklin of Pett,Franklin & Co. LLP.