SIP & SAYE Government Consultation Response

A few weeks ago we submitted our response to the Government consultation on Share Incentive Plans (SIPs) and Save As You Earn (SAYE) employee share schemes. The aim of the call for evidence from the Government was for them to consider the opportunities to improve and simplify these schemes. The closing date for this was the 25th August.

Our summarised response about SIPs is below:

Length of time to qualify should be reduced

We think it is important that the length of time for SIP shares to qualify for full tax relief is reduced for the current five years to two years. In our experience, in the current uncertain economic climate and fluid jobs market, being locked into a share scheme for five years does not provide a realistic incentive. In effect, fewer employees are willing to take up the incentive, in our experience, even, perhaps surprisingly, in the case of Free Shares, where on the face of it they are getting ‘something for nothing’.

We think that reducing this period to two years, would make SIPs much more of an incentive and encourage more employees to participate.

Mechanism to transfer shares from an Employee Ownership Trust (EOT) should be simplified

We think it is important that the mechanism to transfer shares from an EOT to a SIP is made simpler. In our experience, many employee-owned businesses wish to incentivise their staff and encourage employee participation in the business through the use of a SIP (whilst retaining the EOT as majority owner). This is to be encouraged.

However, under the legislation as it stands, getting shares out of an EOT into a SIP is complex and the only way we understand this can currently be achieved is through a purchase of the shares from the EOT Trustee by the SIP.

Where the SIP shares are then to be awarded as Free Shares this creates an unnecessary funding obligation.

Where Partnership Shares are to be awarded with an accumulation period and the funding of the SIP’s purchase is to come from employee contributions, this is difficult to achieve as their purchase price will be the lower of market value at the beginning and end of the period It would be far more practical in either case if shares could simply be gifted from the EOT to a SIP.

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We are now forming our response to the next Government consultation on the future of Employee Benefit Trusts (EBTs) and EOTs. To read more about this visit our blog post here.

If you would like us to include your thoughts and views within our response please call us on 020 38189420 or email info@postlethwaiteco.com with ‘Government Consultation’ as the subject line – please do this by this Friday (15th September).

The deadline for responses to the EOT and EBT consultation is 25 September 2023.