Some Long Term Incentive Plans (LTIPs) pay out awards in
tranches. The details of different schemes will vary. For example,
an LTIP fund containing deferred bonuses and matching awards may
pay out 20% per annum over five years or nothing in Years 1 and 2
and 33% per annum in Years 3 to 5. Entitlement may be conditional
upon participants meeting performance conditions and remaining in
employment.
The period that each tranche is “for” has to be
determined. If the evidence shows that the Plan is intended to
reward performance over the period from award to vest, each part of
the final payment is “for” the period from the original
award date until it vests, calculated as per Section 16(4) on a
just and reasonable apportionment. In the first example, 20% is
“for” Year 1; 20% is “for” Years 1 and 2,
and so on. Alternatively, if there are no performance conditions
and the Plan emphasises being in employment at each vesting date,
each payment may be treated as earnings “for” the tax
year of receipt.
