Other Income

Hi, My partner held some shares through an employee Share Incentive Plan (matched shares) and has sold them after the full five years had passed. I've searched everywhere, including the Tax Credits Manual to see if the sale of the shares should be included as income and can't find any guidance from HMRC. It appears that SIP shares are treated differently to other shares for tax purposes and the Tax Credits manual suggests this means the sale of them is not treated as income. Could you please advise or point me in the direction of where the legislation says if it's income or capital? Any help much appreciated Many thanks

Hi Mike J,

Please see the relevant legislation which covers Share Incentive Plans. 
Share Incentive Plan legislation
Reg 4(1)(l) of the D&CI Regs requires that we should also include as income the following...
                        (l)     any amount charged to income tax for that year under Part 7 of ITEPA.
Part 7 of ITEPA includes Chapter 6 – Share Incentive Plans which sets out all the tax provisions relating SIPs, including circumstances where the participant leaves the plan early, and where payment is made to the participant on completion of the SIP period.  
Where the participant leaves the plan early, the amount they receive will be subject to income tax unless they satisfy specific conditions set out in s498 of ITEPA (e.g. scheme no longer operating following company takeover, redundancy etc).  
When a SIP plan matures as per the agreed fixed period, s490 Part 7 Ch6 ITEPA explains that a person is not liable to income tax on the value of the beneficial interest in the shares at the time of award or acquisition.
Therefore, if the sums are not chargeable to tax under Part 7 of ITEPA, then we would not include the sums as employment income under Reg 4(1) (l).
In this instance if the customer has not left the plan early then we wouldn’t include the income for tax credits.
This is because at the point of maturity this sum is not subject to income tax by virtue of s490 of ITEPA.
Thank you. 
 

Hi, thank you for your answer - it is exactly the clarification I was looking for and I really appreciate your time in presenting it comprehensively and step by step. Thanks once again Kind Regards Mike