Marie Flynn
Ireland should follow the UK in introducing tax advantages for employee-owned companies, a business group has said.
The Irish ProShare Association (IPSA) made the call after digital marketing agency Wolfgang Digital became the first Irish-owned company to become employee-owned using an employee ownership trust (EOT), the model popularised by British retailer John Lewis. MORE
Revenue approved share schemes
Overview
An employer needs Revenue approval to set up certain tax-efficient employee share schemes. These are
known as ‘approved share schemes’. There are three types of Revenue approved employee share schemes:
• Approved Profit-Sharing Schemes (APSSs)
• Employee Share Ownership Trusts (ESOTs)
• Save As You Earn (SAYE) schemes.
Shares awarded, or options granted, under an APSS and SAYE scheme, are exempt from Income Tax (IT).
If the ESOT is used in conjunction with an APSS, those shares are also not subject to IT.
You must pay Universal Social Charge (USC) and Pay Related Social Insurance (PRSI) on the value of the
shares.
Guide to Employee Share Ownership Plans (ESOP)
In Ireland ESOP is the term commonly used to describe an all-employee share
participation plan which is made up of a combination of two Revenue approved share
schemes, viz, the Employee Share Ownership Trust (ESOT) and the Approved Profit
Sharing Scheme (APSS). Historically ESOPs are most prevalent where semi-state
bodies are being privatised or sold, although any company may choose to implement one.
The ESOT is a tax favoured vehicle which typically stockpiles shares for employee
participants for distribution over time. It does not itself afford participants direct access to
shares in a tax efficient manner. Tax relief is afforded to participants by way of share
appropriations via an APSS. The main features of an ESOT are outlined below. For more
information on the operation of an APSS please see the Guide to Approved Profit Sharing
Schemes.
Employee-share-schemes-in-Ireland 2
Employees can avail of certain share options from their company that may be exempt from income tax.
There are 3 main ways in which an employee can benefit from shares in the company:
• Approved Profit-Sharing Schemes
• Share Options
• Key Employee Engagement Programme (KEEP)
Generally, gains arising from various share schemes are subject to the Universal Social Charge (USC) and
Pay Related Social Insurance (PRSI). Gains from share options on the KEEP programme are instead subject
to Capital Gains Tax.
Revenue approved share schemes
by Robert Scallon
Overview
An employer needs Revenue approval to set up certain tax-efficient employee share schemes. These are
known as ‘approved share schemes’. There are three types of Revenue approved employee share schemes:
• Approved Profit-Sharing Schemes (APSSs)
• Employee Share Ownership Trusts (ESOTs)
• Save As You Earn (SAYE) schemes.
Shares awarded, or options granted, under an APSS and SAYE scheme, are exempt from Income Tax (IT).
If the ESOT is used in conjunction with an APSS, those shares are also not subject to IT.
You must pay Universal Social Charge (USC) and Pay Related Social Insurance (PRSI) on the value of the
shares.
Employee share schemes in Ireland 1
by Robert Scallon
Employees can avail of certain share options from their company that may be exempt from income tax.
There are 3 main ways in which an employee can benefit from shares in the company:
• Approved Profit-Sharing Schemes
• Share Options
• Key Employee Engagement Programme (KEEP)
Generally, gains arising from various share schemes are subject to the Universal Social Charge (USC) and
Pay Related Social Insurance (PRSI). Gains from share options on the KEEP programme are instead subject
to Capital Gains Tax.