(2) The amount may be retained by the trustees and carried forward to be added
to the amount of the next cash dividend to be reinvested.
(3) If so retained, the trustees must hold the amount so as to be separately
identifiable for the purposes of sub-paragraphs (4) and (5).
(4) An amount retained under this paragraph must be paid over to the
(a) if or to the extent that it is not reinvested within the period of 3 years
beginning with the date on which the dividend was paid, or
(b) if during that period the participant ceases to be in relevant
employment (see paragraph 95), or
(c) if during that period a plan termination notice is issued in respect of
the plan (see paragraph 90).
(5) An amount required to be paid over to the participant under sub-paragraph
(4) must be paid over as soon as practicable.
(6) For the purposes of this paragraph an amount carried forward under this
paragraph derived from an earlier cash dividend is to be treated as
reinvested before an amount derived from a later cash dividend.
Cash dividends where no requirement to reinvest
69 (1) The plan must require any distributable cash dividends in respect of plan
shares held on behalf of a participant to be paid over to the participant as
soon as practicable.
(2) “Distributable cash dividends” means cash dividends which are not
required to be reinvested under the plan.
Requirements etc. relating to trustees: introduction
70 (1) A SIP must meet the plan requirements contained in—
paragraph 71(1) and (2) (establishment of trustees), and
paragraph 79 (meeting by trustees of PAYE obligations).
(2) The following provisions also relate to the trustees—
paragraph 71(3) to (6) (the trust instrument and classes of trustees)
paragraph 72 (duty to act in accordance with participant’s directions),
paragraph 73 (duty not to dispose of plan shares),
paragraph 74 (duty to make payments to participants),
paragraph 75 (duty to give notice of award of shares etc.),
paragraph 76 (power to borrow).
paragraph 77 (power to raise funds to subscribe for rights issue),
paragraph 78 (acquisition of shares from employee share ownership
paragraph 80 (other duties in relation to tax liabilities).
Establishment of trustees
71 (1) The plan must provide for the establishment of a body of trustees consisting
of persons resident in the United Kingdom (“the trustees”).
(2) The plan must provide that the trustees are required—
(a) in the case of free or matching shares, to acquire shares and
appropriate them to employees in accordance with the plan,
(b) in the case of partnership shares, to apply partnership share money
in acquiring shares on behalf of employees in accordance with the
(c) in the case of dividend shares, to apply cash dividends in acquiring
shares on behalf of participants in accordance with the plan.
(3) The functions of the trustees with respect to shares held by them must be
regulated by a trust (“the plan trust”)—
(a) which is constituted under the law of a part of the United Kingdom,
(b) the terms of which are embodied in an instrument which complies
with the requirements of this Part of this Schedule (“the trust
(4) The trust instrument must not contain any terms which are neither essential
nor reasonably incidental to complying with the requirements of this Part of
(5) The trust instrument may contain terms that—
(a) define who is a professional trustee and who is a non-professional
(b) require the trustees to include at least one person who is a
professional trustee and at least two who are non-professional
(c) require at least half of the non-professional trustees to have been,
before being appointed as trustees, selected in accordance with a
specified process of selection;
(d) require the trustees so selected to be persons who are employees of
the company or, in the case of a group plan, of a participating
(6) The terms mentioned in sub-paragraph (5) are to be regarded as reasonably
incidental to complying with the requirements of this Part of this Schedule
for the purposes of sub-paragraph (4).
Duty to act in accordance with participant’s directions
72 (1) The trust instrument must require the trustees—
(a) to dispose of a participant’s plan shares, and
(b) to deal with any right conferred in respect of any of a participant’s
plan shares to be allotted other shares, securities or rights of any
only in accordance with a direction given by or on behalf of the participant.
(2) Sub-paragraph (1) is subject to—
(a) paragraph 73 (duty not to dispose of plan shares), and
(b) any provision in the plan made in accordance with paragraph 79
(meeting by trustees of PAYE obligations).
(3) The plan may provide for participants to give such general directions, to
such effect and in such terms, as are specified in the plan.
Duty not to dispose of plan shares
73 (1) This paragraph applies to a participant’s plan shares that are free, matching
or dividend shares.
(2) The trust instrument must prohibit the trustees from disposing of any of
those shares (to the participant or otherwise) at any time during the holding
period, unless the participant has at that time ceased to be in relevant
(3) Sub-paragraph (2) is subject to—
(a) paragraph 37 (holding period: power to direct trustees to accept
general offers etc.),
(b) paragraph 77 (power of trustees to raise funds to subscribe for rights
(c) paragraph 79 (meeting by trustees of PAYE obligations), and
(d) paragraph 90(5) (termination of plan: early removal of shares with
Duty to make payments to participants
74 (1) The trust instrument must require the trustees to pay over to a participant as
soon as practicable—
(a) any money received by them in respect of, or by reference to, any of
the participant’s shares, or
(b) any money’s worth so received unless it consists of new shares
within the meaning of paragraph 87 (company reconstructions).
(2) Sub-paragraph (1) is subject to—
(a) paragraphs 62 to 69 (cash dividends and dividend shares),
(b) the trustees’ obligations under sections 510 to 514 (PAYE: shares
ceasing to be subject to plan; capital receipts), and
(c) the trustees’ PAYE obligations.
Duty to give notice of award of shares etc.
75 (1) The trust instrument must make the following provision regarding notices.
(2) It must provide that, as soon as practicable after any free or matching shares
have been awarded to an employee, the trustees must give the employee
notice of the award—
(a) specifying the number and description of those shares,
(b) stating their market value on the date on which they were awarded
to the employee, and
(c) stating the holding period applicable to them.
(3) It must provide that, as soon as practicable after any partnership shares have
been awarded to an employee, the trustees must give the employee notice of
(a) specifying the number and description of those shares,
(b) stating the amount of partnership share money applied by the
trustees in acquiring the shares on behalf of the employee, and
(c) stating their market value on the acquisition date (as defined by
paragraph 50(4) or, if there is an accumulation period, by paragraph
(4) It must provide that, as soon as practicable after any dividend shares have
been acquired on behalf of a participant, the trustees must give the
participant notice of the acquisition—
(a) specifying the number and description of those shares,
(b) stating their market value on the acquisition date (as defined by
(c) stating the holding period applicable to them, and
(d) informing the participant of any amount carried forward under
paragraph 68 (reinvestment: amounts to be carried forward).
(5) It must provide that, where any foreign cash dividend is received in respect
of plan shares held on behalf of a participant, the trustees must give the
participant notice of the amount of any foreign tax deducted from the
dividend before it was paid.
(6) In sub-paragraph (5) “foreign cash dividend” means a cash dividend paid in
respect of plan shares in a company not resident in the United Kingdom.
Power of trustees to borrow
76 The trust instrument may provide that the trustees have power to borrow—
(a) to acquire shares for the purposes of the plan, and
(b) for such other purposes as may be specified in the trust instrument.
Power of trustees to raise funds to subscribe for rights issue
77 (1) The trustees may dispose of some of the rights arising under a rights issue in
order to be able to obtain sufficient funds to exercise other such rights.
(2) The power conferred by sub-paragraph (1) is subject to paragraph 72 (duty
to act in accordance with participant’s directions).
Acquisition by trustees of shares from employee share ownership trust
78 (1) The trust instrument must provide that, where there is a qualifying transfer
of shares to the trustees, the shares—
(a) must not be awarded to participants under the plan as partnership
(b) must be included in any award of free or matching shares made after
the date of the transfer in priority to other shares available for
inclusion in that award.
(2) For the purposes of this paragraph there is a qualifying transfer of shares to
the trustees if—
(a) relevant shares (as defined by section 69(3AC) of FA 1989) are
transferred to them by the trustees of an employee share ownership
(b) the transfer is a qualifying transfer within section 69(3AA) of that Act
(transfer of shares in, or shares purchased from money in, an
employee share ownership trust immediately before 21st March
Meeting by trustees of PAYE obligations
79 (1) The plan must make provision to ensure that, where a PAYE obligation is
imposed on the trustees as a result of any of a participant’s plan shares
ceasing to be subject to the plan, the trustees are able to meet that
(a) by disposing of any of those shares, or
(b) if there are any remaining plan shares of the participant, by
disposing of any of those shares, or
(c) by the participant paying to the trustees a sum equal to the amount
required to discharge the obligation.
(2) A “PAYE obligation” includes an obligation under any of sections 510 to 512
(PAYE: shares ceasing to be subject to the plan).
(3) For the purposes of sub-paragraph (1) any reference to the trustees
disposing of shares includes a reference to their acquiring the shares as
trustees for the purposes of the trust.
(4) A disposal of any of the participant’s plan shares in accordance with
provision made under sub-paragraph (1)(b) may give rise to a charge to tax
section 505 (charge on free or matching shares ceasing to be subject to
section 506 (charge on partnership shares ceasing to be subject to
section 68B(2) or 251C(1) of ICTA (charge under Case V of Schedule D
or Schedule F on dividend shares ceasing to be subject to plan).
Other duties of trustees in relation to tax liabilities
80 (1) The trust instrument must require the trustees to maintain such records as
may be necessary for the purposes of—
(a) their own PAYE obligations, or
(b) the PAYE obligations of the employer company so far as they relate
to the plan.
(2) In sub-paragraph (1)—
“PAYE obligations”, in relation to the trustees, includes obligations
under sections 510 to 514 (PAYE: shares ceasing to be subject to plan
and capital receipts);
“the employer company” has the same meaning as in section 513.
(3) The trust instrument must require the trustees, where the participant
becomes liable to income tax under—
(a) this Act, or
(b) Case V of Schedule D or Schedule F,
by reason of the occurrence of any event, to inform the participant of any
facts relevant to determining that liability.
(4) Section 234A(4) to (11) of ICTA (information relating to distributions to be
provided by nominee) applies in relation to—
(a) the balance of any cash dividend paid over to the participant under
(b) any amount paid over to a participant under paragraph 68(4)
(dividend retained for reinvestment and later paid out), or
(c) any relevant dividend (see sub-paragraph (5)),
as if it were a payment to which section 234A(4)(b) applied (and, in the case
of an amount within paragraph (b) above, as if the cash dividend had been
paid at the time of the payment to the participant under paragraph 68(4)).
(5) In a case where dividend shares cease to be subject to the plan before the end
of the period of 3 years beginning with the date on which they were acquired
on a participant’s behalf, the cash dividend applied to acquire dividend
shares on the participant’s behalf is a “relevant dividend” for the purposes
of sub-paragraph (4)(c).
Approval of plans
Application for approval
81 (1) Where—
(a) a SIP has been established, and
(b) the company makes an application to the Inland Revenue for
approval of the plan,
the Inland Revenue must approve the plan if they are satisfied that it meets
the requirements of Parts 2 to 9 of this Schedule.
(2) An application for approval must—
(a) be in writing, and
(b) contain such particulars, and be supported by such evidence, as the
Inland Revenue may require.
(3) Once the Inland Revenue have decided whether or not to approve the plan,
they must give notice of their decision to the company.
Appeal against refusal of approval
82 (1) If the Inland Revenue refuse to approve the plan, the company may appeal
to the Special Commissioners.
(2) The notice of appeal must be given to the Inland Revenue within 30 days
after the date on which notice of their decision is given to the company.
(3) If the Special Commissioners allow the appeal, they may direct the Inland
Revenue to approve the plan with effect from a date specified by the
(4) The date so specified must not be earlier than that of the application for
Withdrawal of approval
83 (1) This paragraph applies if a disqualifying event (see paragraph 84) occurs in
relation to an approved SIP.
(2) The Inland Revenue may by a notice given to the company withdraw the
approval with effect from—
(a) the time at which the disqualifying event occurred, or
(b) a later time specified by the Inland Revenue in the notice.
(3) The withdrawal of approval of a SIP does not affect the operation of the SIP
code in relation to shares awarded to participants in the plan before the time
with effect from which approval was withdrawn.
(4) References in the SIP code to an approved SIP in relation to such shares are
to a plan that was approved at the time when the shares were awarded.
Disqualifying events for purposes of paragraph 83
84 (1) The following are disqualifying events for the purposes of paragraph 83—
(a) a contravention in relation to the operation of the plan of any of the
requirements of this Schedule, the plan itself or the plan trust;
(b) an alteration being made in a key feature of the plan, or in the terms
of the plan trust, without the approval of the Inland Revenue;
(c) if the plan provides for performance allowances in accordance with
paragraph 42 (method two), the setting of performance targets in
respect of an award of shares which are not consistent targets (within
the meaning given by paragraph 42(6));
(d) an alteration being made in the share capital of the company whose
shares are the subject of the plan, or in the rights attaching to any
shares of that company, that materially affects the value of
participants’ plan shares;
(e) shares of a class of which shares have been awarded to participants
receiving different treatment in any respect from the other shares of
(f) the trustees failing to furnish any information which they are
required to furnish under paragraph 93 (power to require
(g) the company, or (in the case of a group plan) a company which is or
has been a constituent company, failing to furnish any information
which it is required to furnish under that paragraph.
(2) For the purposes of sub-paragraph (1)(b) the Inland Revenue may not
withhold their approval unless it appears to them at the time in question that
the plan as proposed to be altered would not then be approved on an
application under paragraph 81.
(3) Sub-paragraph (1)(e) applies, in particular, to different treatment in respect
(a) the dividend payable,
(c) the restrictions attaching to the shares, or
(d) any offer of substituted or additional shares, securities or rights of
any description in respect of the shares.