Tax

New share scheme for SME’s Key Employee Engagement Programme

The Key Employee Engagement Programme (“KEEP”) was introduced by Finance Act 2017. This is a new tax efficient share based remuneration incentive for SME’s, aimed at assisting them to attract and retain key employees.

Summary of the relief

Any gain realised on the exercise of a “qualifying share option” granted by a “qualifying company” on or after 1 January 2018 and before 1 January 2024 is fully exempt from income tax, USC and PRSI. Share options gains are subject to capital gains tax (CGT) on disposal of the shares.

Therefore, option holders may benefit from a potential tax saving of up to 19% (current CGT rate of 33% compared to current marginal income tax rates of 52%)and defer payment of taxes due until the disposal of the shares.

Conditions for the relief

Qualifying shares

  • new ordinary fully paid up shares, which carry no present or future preferential rights regarding dividends, assets on winding up or redemption;
  • the option price at the date of grant cannot be less than the market value;
  • a written contract is required and options must be exercised within a relevant period; and
  • the total market value of all shares, in respect of which qualifying share options have been granted cannot exceed:
    • €100,000 in any one year of assessment;
    • €250,000 in any 3 continuous years of assessment; or
    • 50% of the annual emoluments of the individual in the year of assessment in which the qualifying share option is granted.

Qualifying company

  • Irish/EEA incorporated and Irish resident or carrying on a qualifying trade in Ireland through a branch or agency;
  • carrying on qualifying activities other than excluded activities, such as, for example, financial activities, professional services, building and construction etc.;
  • unquoted or quoted on an unlisted securities market of a stock exchange;
  • the total market value of the issued but unexercised qualifying share options cannot exceed €3,000,000; and
  • a company whose business consists wholly of holding shares in a qualifying company may also avail of the relief in certain circumstances.

Qualifying employee

  • full-time employee or a director, devoting substantially the whole of his or her time to the service of the company;
  • the office or employment should be capable of lasting at least 12 months; and
  • the individual must not hold directly or indirectly more than 15% of the shares.

Employer obligations

  • employers must submit returns by 31 March of the following year. A qualifying company may also be requested by the Revenue Commissioners to furnish other specified information; and
  • employers must ensure that the conditions of the scheme continue to apply throughout the relevant period. Regular reviews are essential to avoid withdrawal of the relief.

How can we help?

We have many years of experience in advising and assisting companies on all aspects of various share based reward including:

  • comprehensive review of existing remuneration packages;
  • design and development of a tailored share scheme;
  • implementation of the share scheme;
  • employee communications; and
  • ongoing administration, management and review of the share scheme.