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The impact of COVID-19 on SIP and SAYE

Russell Kuma, Manager, Share Plans, Employers Advisory Group
15/04/2020
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In response to the disruption caused by the COVID-19 crisis, the QCA’s Share Schemes Expert Group have provided some commentary which may be useful to companies which currently operate a Save As You Earn (SAYE) scheme or a Share Incentive Plan (SIP).

SAYE

Changing or pausing contributions

Participants cannot change the amount of the contributions to their SAYE account. They can, however, cease contributions for up to 12 months without causing the options to lapse provided the plan rules do not state that the options would lapse earlier than this. Where this is the case, the company may, subject to the plan rules, be able to amend the rules to allow for a 12 month period. The employee would need to instruct their employer to stop taking contributions from their salary during this time.

Where contributions are suspended, the maturity date of the option will be extended proportionately to account for the months of ‘suspended’ contributions. Any movement of the original maturity date may mean that the new maturity date may either fall within a closed period and/or that the employee may have to wait longer before participating in any new SAYE invitation made by the employer company.

Withdrawal of savings

Participants may withdraw their savings, however, if this happens before the SAYE option matures, the option shall lapse. If savings are withdrawn after the SAYE option matures, it should not lapse. In addition, after the SAYE option has matured, the savings carrier may allow the participant to withdraw their savings and then return cash to the savings account within the six month period following maturity, to enable them to exercise their SAYE option before it lapses.

Furloughed employees

Furloughed employees are still employees for the purposes of SAYE. Companies should seek further advice for participants who are full-time non-executive directors. 

SIP

Changing or pausing contributions

Participants who buy partnership shares on a monthly basis may change their contributions or pause and restart their deductions from their salary at any time. This may impact an accumulation period or a matching share entitlement. While participants cannot make up any missed deductions, the company may provide a ‘lump sum’ or ‘top-up’ facility to provide some flexibility where deductions are missed. Any instructions to amend, stop and restart deductions will normally be processed within a 30 day period but specific terms in the Partnership Share Agreement should be adhered to.

The company must continue to assess the annual limit of £1,800 or 10% of salary (if lower) where the employee’s hours are reduced. Where relevant, it may be necessary for deductions to be made under the Partnership Share Agreement. The excess should be paid back to the employee via the payroll so that PAYE and Class 1 National Insurance Contributions (NICs) can be collected.  

Terminating the SIP

To terminate the SIP, the company will need to issue a Plan Termination Notice. Once issued, all share purchases will cease and the SIP Trustee must transfer all the shares that it holds on their behalf either to the participant’s share dealing account or by selling the shares on the participant’s behalf. This must happen within three months of receiving the notice, or if later, the first date on which shares can be removed from the SIP without incurring an income tax charge or Class 1 NIC charge, unless otherwise agreed with the participants.

Furloughed employees

Furloughed employees are still employees for the purposes of the SIP although a reduction of their salary may impact the annual limits for the SIP.

For more information and to discuss your specific circumstances please contact Caroline Harwood or your usual Crowe contact.

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Caroline Harwood
Caroline Harwood
Partner, Head of Share Plans and Employment Tax
London