Share Incentive Plan (SIP): a plan for all seasons

This month, John Lewis Partnership celebrated spring by announcing celebrations for its 150th anniversary. Happy birthday to the biggest UK co-owned business!

For many people, John Lewis is the poster boy of employee ownership in the UK, with the business owned in trust on behalf of every single one of the company’s employees (Partners). The company is rightly proud of its ownership model. Charlie Mayfield, the Chairman, recognised that “our ownership by Partners has played a key role” in the positive financial results, recognising in particular the willingness of the Partners to understand and embrace the need for change in a difficult and challenging market for retail.

If you’re thinking of “doing a John Lewis”, there are plenty of ways to set about it. But the government recognised Share Incentive Plan (SIP) is an excellent starting point, with its almost unbelievable tax efficiency, huge flexibility and – following recent changes in the law – straightforward implementation.

In brief summary, here are the key benefits of a SIP for a company looking to offer wider employee ownership:

  • A Plan for all employees, with shares held in trust on their behalf
  • Long-term retention is rewarded – after 5 years the entire value of the shares, including gains, is free of tax
    No Income Tax
    No National Insurance Contributions
    No Capital Gains Tax
  • Shares can be offered free, or can be paid for out of pre-tax salary – or you can use a mixture of the two (including Buy One Get Two Free)
  • Individuals may acquire up to £9,000 worth of shares each year
  • Dividends may be reinvested
  • Corporation tax deductions for the company – and an upfront deduction in certain circumstances if the trust acquires 10% of the share capital from an individual
  • Leavers can be required to sell shares back
  • Shares can be non-voting

John Lewis is not the only employee owned business in the UK, but it’s the best known. Many see it as living evidence that employee ownership across all employees, implemented correctly and communicated strongly, can really make a difference to the bottom line.

If you’d like to find out more about using SIP to put in place you own John Lewis style arrangement, call us on 020 8949 5522, or email