SIP to SIPP
One of the potential benefits a Corporate SIPP can offer is a greater integration between a company’s share schemes and their pension scheme.
What is a SIP?
The Share Incentive Plan (SIP) is a Government approved, tax efficient way for employees to hold shares in their employer.
In order to ensure full relief from Income tax and National Insurance Contributions the scheme must be approved by HM Revenue & Customs (HMRC) and the shares must be held for a minimum of 5 years.
Once the shares have been held in the plan for the required time, the employee may want to take the shares out of the SIP and hold them personally (say, for example, because they wish to sell them). Both quoted and unquoted shares can be held in a SIP this way.
When can shares be put into a SIPP?
Once an employee has exercised an option to take the shares out of the SIP, they are able to sell them or transfer ownership. However, there is a window of 90 days in which the shares can be transferred over to a suitable registered pension scheme as a personal contribution.
Why transfer the shares into a SIPP?
There are two main tax advantages in doing this:
- Capital Gains Tax protection - once the shares leave the SIP, any growth from there will be a potentially chargeable capital gain. But the 'base; for capital gains under the SIP rules will be the market value of the shares at the time they leave the SIP. So the capital gain on transfer to the SIPP within the 90-day window will mean in most cases, be nil or minimal. Once in the SIPP, any subsequent capital gain on eventual sale is exempt from Capital Gains Tax under the current tax rules.
- Income Tax relief - the transfer of ownership to the SIPP of the shares will be treated as a personal contribution, attracting tax relief just as any cash contribution (assuming within limits).
To find out more about SIP to SIPP, please contact Philip Hutchinson on 01858 419300 or email phutchinson@sippsolutions.com.
If you would to receive a copy of our SIP to SIPP Fact Sheet, or require any further information about the Pointon York SIPP Solutions Corporate SIPP, then please contact Philip Hutchinson on 01858 419300 or email him at phutchinson@sippsolutions.com.